No Causation, No Commission, Even If the Agent Had Identified the Buyer?

In this decision, the Federal Supreme Court had to determine whether a broker who had merely identified the buyer could nevertheless claim commission after a second broker completed the transaction. The Federal Supreme Court considered that the second agreement concluded between the client and the first broker only amended the initial contract, that the first broker’s activity had no causal effect on the sale, and that the contractual provision relied upon was not clear enough to derogate from Art. 413 para. 1 SCO.

Judgment of the Federal Supreme Court of 20 September 2024

Case Reference : 4A_529/2023

Facts

On July 13, 2017, A. (the “Client”) and B. (the “First Broker”) concluded an exclusive brokerage contract (the “First Contract”) for the sale of a 7.5-room apartment (the “Property”) at a price of CHF 6,000,000. The Contract stipulated at article 6.1 of the terms of service that the brokerage fees were due in particular “upon conclusion of the sales contract with the person introduced by the broker”[1] and “when the principal sells the property to a person introduced by the broker (exclusive or not) within one year of the end of the contract”.[2]

On January 16, 2018, the First Broker sent an activity report to the Client, stating that the company had shared the listing to approximately one hundred people, including the future buyer (the “Buyer”) who would eventually be purchasing the apartment with his wife. On January 17, 2018, an employee of the First Broker’s employees conducted a viewing of the Property with the Buyer. However, the Buyer did not put in an offer after the viewing.

Seven months later, with no buyer in sight, the Client requested to revoke the exclusivity clause of the First Contract in order to hire other brokers to search for potential buyers. On March 1, 2018, the parties entered into a new agreement (the “Second Contract”), which retained the same terms of service but removed the exclusivity clause. It also included a lump-sum fee of CHF 15,0000 payable to the First Broker in the event the sale was concluded through another broker.

That same month, the client also entered into brokerage agreements with C. (the “Second Broker”) and D., two real estate brokerage companies.

In November 2018, after continued difficulties selling the Property, the Client reduced the asking price to CHF 4,800,000. The First Broker informed the Buyer of the new price on November 15, 2018. The Second Broker, informed of the price change on November 21, 2018, shared the listing and subsequently arranged a viewing with the Buyer in late December.

On January 7, 2019, the Buyer put in an offer to buy the Property. The accepted the offer later that month and paid the brokerage fee to the Second Broker. Upon learning of the sale, the First Broker, issued an invoice for CHF 155,088 to the Client, who refused to pay. Following debt collection proceedings, both the Court of first instance and the Cantonal court upheld the First Broker‘s claim and ordered the Client to pay the brokerage fee.

The Client appealed the judgment of the Cantonal court to the Federal Supreme Court.

Issue

The Federal Supreme Court reviewed the three motives that led to the Cantonal court’s decision, answering three legal questions:

  1. Did the Second Contract cancel and replace the First Contract, or merely modified it?;
  2. Was there a direct causal or psychological link between the actions of the First Broker and the sale of the Property?;  and
  3. Did article 6.1 of the terms of service (common to the First and Second Contract) constitute a valid derogation from 413 para. 1 of the Swiss Code of Obligations (SCO)?

Decision

  1. Conclusion of the Second Contract

In order to determine whether the Second Contract replaced or modified the First Contract, the Federal Supreme Court applied the general rules of contract interpretation. Under Swiss law, when interpreting a contract, the judge has to first ascertain the true and common intent of the parties (art. 18 para. 1 SCO). Finding this true and common intent is a matter of fact that the Federal Supreme Court cannot review as a matter of principle (art. 105 of the Federal Supreme Court Act [FSCA]). Thus, the findings of the Cantonal court are binding on that matter.

If a true and common intent cannot be determined, the judge must interpret the contract in light of the principle of trust, where the contract is interpreted according to the rules of good faith, and based on the meaning that each party could and should reasonably have attributed to the other’s declarations of will. This principle allows a party to be bound by the objective meaning of its statements or conduct, even if that meaning does not correspond to its innermost will. This interpretation is a matter of law that the Federal Supreme Court can freely review (art. 106 para. 1 FSCA).

In the case at hand, the Cantonal court had left this entire question unresolved in its preliminary ruling, before deciding in its final ruling that the Second Contract had cancelled and replaced the First Contract. However, it relied on facts from the First Contract period to establish causation, thus creating an internal contradiction. For this reason, the Federal Supreme Court sought the true and common intention of the parties.

Considering that the Client had specifically asked to sign a new contract without the exclusivity clause of the First Contract, and that the rest of the contractual relationship did not change, the Federal Supreme Court ruled that the parties’ intent was not to cancel/replace the contract but merely modify it.

  1. Causal/Psychological link

Under art. 412 para. 1 SCO a brokerage contract is either:

  • an indication brokerage, where the broker merely identifies a contractual opportunity without influencing the third party’s intent; or
  • a negotiation brokerage, where the broker actively participates in the negotiation process and must influence the third party’s decision to enter a contract.

In an indication brokerage contract, the role of the broker is only to identify a potential party for a transaction and does not exert an influence on the will of the potential co-contractor(s). Hence, the payment of the fees does not require any psychological link between the broker’s work and the conclusion of the contract, unlike in a negotiation brokerage contract where the broker must convince the potential co-contractor(s) to conclude a contract.

In the case at hand, the parties were bound by an indication brokerage contract. The Federal Supreme Court underlined that it was indeed the First Broker that had communicated the Buyer’s name to the Client first (on January 16, 2018), and had conducted the first viewing (on January 17, 2018). However, at this moment in time, the asking price was CHF 6,000,000, which was too high for the Buyer. No offer to purchase the Property was made after the viewing, and no negotiations followed.

When the price of the Property was reduced to CHF 4,800,000 in November of 2018, the First Broker had notified the Buyer first, but had received no reply. However, simply informing a potential buyer of a price change does not equate to informing the broker’s client of an opportunity to sell. The decisive factor in the sale was the Second Broker’s communication with both the Buyer and the Client in December, which led directly to the transaction..

  1. Derogation from art. 413 para. 1 SCO

In the absence of a causal link, the First Broker’s only remaining basis for claiming a fee was the argument that art. 6.1 of the general terms constituted a valid derogation from art. 413 para. 1 SCO.

Art. 413 para. 1 SCO is not considered to be imperative law; parties to a brokerage contract can agree on a different method to remunerate a broker. Said alternative method is often agreed upon to ensure that the broker’s remuneration does not depend solely on the conclusion of the targeted contract, and to better account for the time and effort invested, particularly in non-exclusive contracts.

In the case at hand, article 6.1 of the terms of service stated that the sale of the property to a “person introduced by the broker”[3] was sufficient to trigger the obligation to pay the fees. It was, however, not considered as a valid derogation by the Federal Supreme Court.

The contract between the First Broker and the Client had been modified on March 1, 2018, to remove the exclusivity clause, precisely because the Client wanted to have more brokers seeking a potential buyer. It would be inconsistent to allow the First Broker to claim the brokerage fee merely because it had previously communicated the names of individuals who viewed the property but were unwilling to purchase it at the original price of CHF 6,000,000, especially if the sale was ultimately concluded by another broker at a lower price. Moreover, the Second Contract contained a clause that would grant the First Broker a lump-sum fee of CHF 15,000, clearly demonstrating that the parties anticipated and accounted for the possibility of a sale being completed by another broker.

As a result, the Federal Supreme Court allowed the appeal and ruled that the First Broker was not entitled to the fees of CHF 155,088.

Key Takeaways

  1. A contract amendment is merely a specific modality of contract formation and, as such, is governed by the same legal principles that apply to the formation of contracts (art. 1 seq. SCO).
  2. The psychological link requirement established by case law is only relevant in negotiation brokerage. In contract, in indication brokerage, the broker merely identifies and refers potential contracting parties to the principal without influencing their decision to contract.
  3. Art. 413 para. 1 SCO is a default rule. However, according to case law, a party wishing to derogate from art. 413 para. 1 SCO, which is intended to safeguard the interests of both parties, must do so with sufficient clarity. In other words, the clause must be unequivocal. Any ambiguity in a pre-formulated contract must be interpreted against the party who drafted it.

Comments

  1. Contract amendment

A contract amendment is merely a particular form of contract formation and is therefore governed by the same rules governing contracts (art. 1 seq. SCO). In this case, the Federal Supreme Court found that the parties intended to maintain their existing contractual relationship while introducing specific modifications, namely removing the exclusivity clause and adding a provision entitling the broker to remuneration if the sale resulted from the activity of another broker. The fact that the parties signed a new contract at the principal’s request to formalize these changes does not, according to their true intent, amount to two separate contracts.

  1. Psychological link requirement to establish causation
  • Negotiation brokerage

In negotiation brokerage, the broker is entrusted with negotiating with a third party on behalf of the principal. To establish causation under such an arrangement, there must be a psychological link between the broker’s efforts and the third party’s decision to conclude the contract. It is not necessary for the broker’s actions to be the immediate cause of the main contract; a remote or indirect influence may suffice., as long as it contributed to the result that aligns with the principal’s objective. This psychological link may persist even if negotiations are interrupted. It is also irrelevant whether the broker was involved in the final stages of negotiation or whether another broker later became involved. In such cases, causation is only absent when the broker’s efforts had no result, the subsequent negotiations were definitively broken off, and the transaction was ultimately concluded with the same third party under entirely new terms.

  • Indication brokerage

In indication brokerage, the broker merely identifies persons potentially interested in the transaction and does not influence their decision to contract. In this context, to be entitled to remuneration under art. 413 para. 1 SCO, the broker must demonstrate causation, meaning that the information provided to the principal ultimately led to the conclusion of main contract.

Accordingly, the broker must prove: (1) that he or she was the first to identify the person who eventually purchased the property; and (2) that it was precisely as a result of this indication that contact was made between the parties and the sale was concluded.

  • Psychological link requirement applies only to negotiation brokerage

Accordingly, the psychological link requirement established by case law is only relevant in negotiation brokerage, as in indication brokerage the broker merely communicates the names of interested persons to the principal without influencing their intent.

In the case at hand, as the parties were bound by an indication brokerage contract, only the existence of a causal link had to be examined, without any requirement of a psychological link between the broker’s efforts and the third party’s decision to contract.

Moreover, the Federal Supreme Court found that no such link existed. Merely informing potential buyers of a price reduction, via email, does not amount to providing the principal with a concrete indication of a person ready to buy at the new price. The causal link was instead established through the actions of the Second Broker, who reinitiated contact and arranged the decisive viewing that led to the sale.

  1. 413 para. 1 SCO as a default rule

Art. 413 para. 1 SCO is a default rule and parties are free to derogate from it by explicit agreement. However, such a derogation must be clear and unambiguous. Once the parties had entered into a non-exclusive contract, the First Broker could not successfully rely on art 6.1 to claim that merely introducing potential buyers, whether by showing them the apartment when it was listed at CHF 6,000,000 or by sending the listing, was sufficient to trigger the right to brokerage commission. A party seeking to derogate from art. 413 para. 1 SCO, which is intended to safeguard the interests of both parties, must do so with sufficient clarity. In other words, the clause must be unequivocal. Any ambiguity in a pre-formulated contract must be interpreted against the party who drafted it (ATF 113 II 49, para. 1b).

[1] The relevant contract excerpt reads as follows in the original French version : “personne présentée par le courtier”.

[2] The relevant contract excerpt reads as follows in the original French version : “lorsque le mandant vend l’objet à une personne présentée par le courtier (exclusif ou non) dans l’année suivant la fin du contrat”.

Reproduction authorized with the following reference : , "No Causation, No Commission, Even If the Agent Had Identified the Buyer?", published on: Swiss Contract Law, October 15, 2025, https://scl.cultureweb.ch/46/



Are broker fees on a real estate transaction conditional on a minimum sale price?

Mélanie Tritten (as Guest contributor)

A contract for the renovation and sale of a property by an architect stated that the sale price “could” fall within a specified range. This clause, when properly interpreted, did not make the architect’s entitlement to fees contingent on achieving a minimum sale price. In the absence of an express or implied agreement between the parties on such a condition, the architect remained fully entitled to the agreed fees, even if the property was sold at a price significantly below the client’s expectations.

Judgment of the Federal Supreme Court of 12 September 2023

Case Reference: 4A_502/2022, 4A_504/2022

Facts

A. (“the Client”) and B. (“the Architect”), together referred herein as “the Parties”, entered into an agreement (“the Agreement”) on September 26, 2011 to extend and renovate A’s property (“the Property”), with a view to sell it.

The Agreement, which consisted of a letter from the Architect countersigned by the Client, notably provided for fees of CHF 446,000 for the Architect to obtain a building permit (“the Building Permit Fee”), as part of the overall operation.

The original French version of the letter also stated that:

« Le prix de vente, comme nous l’avons évoqué[,] pourrait se situer dans une fourchette comprise entre 85 et 100 Millions [sic] de francs. […]

Dans l’éventualité où je trouverais un acquéreur pour un montant qui vous agrée, je serai rémunéré par une commission de 1,5% sur le montant de la vente. »

Unofficial English translation:

“The sale price, as we have discussed[,] could lie in the range of 85 to 100 million francs.[…]” (the “Expected Sale Price Range”).

“In the event that I find a buyer for an amount that is acceptable to you, I will be remunerated with a brokerage fee of 1.5% of the sale price.” (the “Brokerage Fee”).

The Architect obtained a building permit in February 2013.

That same year, the Architect contacted a long-standing professional acquaintance working at company D. (“the Neighbor Company”) that occupied the plot next to the Property to ask him to pass on the proposed sale project to the company’s CEO. This connection led to negotiations for the sale of the Property between the Client, the Architect and the Neighbor Company. These negotiations lasted several years but never led to the sale of the Property as the Client and the Neighbor Company could not agree on the sale price. Throughout this time, the Client and her family repeatedly congratulated the Architect for his work and progress.

During that same period, a bank holding a mortgage on the Property initiated proceedings against the Client to enforce the mortgage. A few days before the auction of the Property, the bank informed the Client of an offer from an undisclosed third party to buy the Property for CHF 29,500,000. The Client accepted the offer that same day. The third party was eventually disclosed to be the Neighbor Company. The Client sold the Property on May 15, 2018 (“the Sale”).

A few months later, the Architect submitted two invoices to the Client. The first one for a total of CHF 480,342 (incl. VAT) for the Building Permit Fee, and the second one for a total of CHF 476,572.50 (incl. VAT) for the Brokerage Fee, which corresponded to 1.5% of the sale price of the Property.

Following debt collection proceedings, the First Instance Court of the Canton of Geneva dismissed the Client’s claim for debt release and confirmed that the two amounts claimed by the Architect were due.

By judgment of September 27, 2022, the Civil Chamber of the Court of Justice (the “Cantonal Court”) partially upheld the Client’s appeal. It confirmed that the Client owed CHF 480,342 for the Building Permit Fee; however, it reduced the Brokerage Fee from CHF 476,572.50 to CHF 79,250.

  • With regard to the entitlement to the Building Permit Fee, the Cantonal Court first pointed out that it was irrelevant whether the Agreement was characterized as a complex agreement providing for both the Building Permit Fee and the Brokerage Fee or as two separate and independent contracts (i.e. one for the Building Permit Fee and one for the Brokerage Fee). It then proceeded to determine the common will of the Parties and held that they had no intention of making the Building Permit Fee conditional on the sale of the Property within the Expected Sale Price Range (i.e. between CHF 85,000,000 and CHF 100,000,000) that was mentioned in the Agreement.
  • With regard to the Brokerage Fee, the Cantonal Court applied 413 para. 1 SCO as well as the so-called principle of equivalence (according to which a brokerage fee is due where a transaction which has taken place is economically equivalent to the transaction that was contemplated by the Parties to the brokerage agreement). It held that the Brokerage Fee should be reduced, given that the Sale (CHF 29.5 MM) was not economically equivalent to the sale price that was desired by the Client (i.e. the Expected Sale Price Range between CHF 85 MM and CHF 100 MM).

Both the Client and the Architect appealed the judgment of the Cantonal Court to the Federal Supreme Court.

Issue

The Federal Supreme Court first had to determine whether or not the interpretation of the Agreement confirmed the Architect had a valid claim of CHF 480,342 for the Building Permit Fee or if, on the contrary, such fee was conditional on the sale of the Property within the Expected Sale Price Range. It then had to determine the amount of the Brokerage Fee and more specifically whether the Cantonal Court was correct in reducing it from CHF 476,572.50 to CHF 79,250.

Decision

The Federal Supreme Court dismissed the Client’s appeal, which challenged the right of the Architect to obtain the Building Permit Fee and the Brokerage Fee (1) and upheld the Architect’s appeal regarding the amount of the Brokerage Fee (2).

On the Client’s appeal

The Client claimed that the Cantonal Court’s interpretation of the Agreement constituted a violation of Art. 18 para. 1 SCO and was arbitrary (Art. 9 of the Federal Constitution of the Swiss Confederation).

According to the general rules of contract interpretation under Swiss law, the judge shall first research the real and common will of the parties (subjective interpretation), if necessary through empirical means such as clues. Clues are not limited to the content of the declarations of will –­ whether written or oral –  but also extend to the general context, i.e. all circumstances making it possible to determine the (real) will of the parties. In the event the court is unable to determine the real and common will of the parties, only then can it resort to the objective method of contract interpretation based on the principle of good faith.

In this case, the Federal Supreme Court first noted that the Cantonal Court had correctly applied the subjective method of contract interpretation to determine the meaning of the Agreement. Consequently, the Federal Supreme Court held that the Cantonal Court had not violated Art. 18 SCO contrary to the Client’s argument.

The Federal Supreme Court then addressed the Client’s criticism of the Cantonal Court’s interpretation of the Agreement. The Client argued that the Parties had entered into a complex contract, which imposed four obligations on the Architect, including obtaining a building permit and selling the Property within the Expected Sale Price Range, and that she would not have signed the Agreement if the fees were due regardless of the sale price of the Property. She considered that the Cantonal Court did not ascertain the real will of the Parties and had confined itself to a literal interpretation of the Agreement.

According to the Federal Supreme Court, however, it is clear from the judgment that the Cantonal Court did examine the wills of the Parties. The wording of the Agreement (which is the primary expression of the parties’ real intent) was convincing enough. In particular, by the use of the conditional tense in the phrase of the Agreement relating to the Brokerage Fee according to which the sale price ‘could’ fall within the range mentioned. No other clause in the Agreement provided that the Brokerage Fee would only be payable in the event of a sale at such a price. The Cantonal Court also took into account factual elements following the conclusion of the Agreement, which confirmed its interpretation of the text of the Agreement. In particular, the Client expressed in 2015 a wish to discuss the sale price she wished to propose with the Architect. Her son also mentioned a sale price of between CHF 55,000,000 and CHF 57,000,000 in 2016.

The Federal Supreme Court, therefore, ruled that the Client’s criticism did not demonstrate how the Cantonal Court’s analysis was untenable.

The Federal Supreme Court therefore dismissed the Client’s appeal.

On the Architect’s appeal

The Architect challenged the judgment from the Cantonal Court which applied the principle of equivalence and Art. 413 SCO to reduce the Brokerage Fee from the initial amount claimed by the Architect of CHF 476,572.50 down to CHF 79,250.

The Federal Supreme Court reminded that parties are free to determine the terms of their contract, within the limits of the law (Art. 19 SCO). The characterization of the contract is only necessary if the application of a mandatory norm is at stake or if it is necessary to look for a suppletive law because the parties’ agreement was incomplete. The need to find a suppletive law to resolve an issue only arises when the issue is not addressed in the contract. Conversely, if the issue is addressed in the contract, it is sufficient to ensure that the rule is valid with regard to the mandatory rules of Swiss contract law.

Art. 413 para. 1 SCO on the broker’s entitlement to his brokerage fee is not a mandatory law. The parties can thus agree that the brokerage fee will be due even if the main contract is not concluded or, on the contrary, that it will only be due on the condition that the contract is not only concluded, but also performed. Therefore, Art. 413 para. 1 SCO is a default rule which applies only if the parties have not addressed this issue in their contract.

Thus, in a dispute over the interpretation of a clause in an agreement providing for a brokerage fee of 1.5% on the sale price, the judge must apply the general principles relating to the interpretation of contracts. It is only if the interpretation does not help resolve the issue in question that the court shall apply the default rule of Art. 413 para. 1 SCO.

In this case, the Federal Supreme Court held that the Cantonal Court had not analyzed the issue logically. When it interpreted the Parties’ Agreement in relation to the Building Permit Fee (see section 1 above), the Cantonal Court considered that, according to the parties’ real and common will, the Expected Sale Price Range was merely indicative and thus did not constitute a commitment on behalf of the Architect to sell the Property within the Expected Sale Price Range. However, when the Cantonal Court analyzed the same clause in relation to the Brokerage Fee to be paid on the Sale (whereby the clause providing for the Brokerage Fee stated that such fee would be due in the event that the Architect would find a buyer for an “amount acceptable to the client”), it directly applied Art. 413 para. 1 SCO as well as the principle of equivalence. In so doing, the Cantonal Court contradicted its previous finding relating to the real intent of the Parties. The Federal Supreme Court found that this was arbitrary (art. 9 of the Federal Constitution of the Swiss Confederation).  The Cantonal Court had failed to take into account that the Parties had contractually agreed on the Brokerage Fee in the Agreement and, as a result, it had violated the principle of freedom of contract.

Therefore, the Federal Supreme Court held that the Architect was fully entitled to the Brokerage Fee for the Sale of the Property (i.e. to 1.5% on the sale price of CHF 29,500,000). The Federal Supreme Court also noted that, as the Brokerage Fee was calculated on the basis of a percentage of the agreed sale price, its amount was reduced in proportion to the difference between the final sale price and the Expected Sale Price Range. For this reason, the Federal Supreme Court held that there was no need to apply Art. 417 SCO which makes it possible for a court to reduce the brokerage fee equitably if such fee is deemed excessive.

Key takeaway

Unless the parties to a brokerage agreement have agreed that the brokerage fee is contingent on the related contemplated transaction (in this case, the sale of the Property) obtaining a minimal value, the brokerage fee must be paid to the broker (in this case, the Architect) even if the sale of said item was significantly lower than the expected sale price.

In terms of methods of contract interpretation/filling contractual gaps, this case also constitutes an important reminder that the default rules of the Code of Obligations (in this case Art. 413 SCO) can only be applied in cases where there is a contractual gap (“lacune contractuelle”/“Vertragslücke”), i.e. in the absence of a contractual solution agreed upon by the parties. The courts must apply the usual methods of contract interpretation to determine whether the parties have agreed on a contractual solution. In this particular case, this was not done adequately by the Cantonal Court.

Comments 

In this interesting case, the Client tried to claim that the different parts of the Agreement (i.e. the part relating to the Building Permit Fee and the one relating to the Brokerage Fee) were interdependent and formed a single agreement, with the ultimate objective pursued by the Parties to sell the Property at a value within the Expected Sale Price Range. The Client therefore claimed that these fees were not due because the Property was sold by the Client under involuntary circumstances at a price which was nearly three times lower than the Expected Sale Price Range.

First of all, the argument relating to the conclusion of a single global contract could not be successfully claimed in this case. As the Cantonal Court recalled in its judgment (see ACJC/1256/2022 of 27 September 2022, para. 3.1), a convention constitutes a complex contract (“zusammengesetzter Vertrag”, “contrat compose” ou “contrat complexe”) or a mixed contract (“gemischter Vertrag”; “contrat mixte”) when, according to the will of the parties, the various relationships that bind them do not constitute independent agreements, but rather represent elements of a complex agreement that are linked together and dependent on one another. With such agreements, the different issues to be resolved must be governed by the legal rules or principles that are appropriate to each of them.[1]

In this case, the Cantonal Court rightly held that the question of whether the Agreement constituted one global agreement, or several independent contracts could remain open, as the Architect’s rights to obtain the Building Permit Fee and the Brokerage Fee were in any case different issues, subject to rules adapted to each of them. It is worth noting that the Parties did not dispute the application of the rules governing the contract for work and services for the Building Permit Fee and those of the brokerage contract for the Brokerage Fee. The Client’s argument relating to the existence of a single agreement was therefore irrelevant to matters relating to the Architect’s right to both the Building Permit Fee and the Brokerage Fee.

Furthermore, the mere argument that the Agreement constituted a complex agreement was insufficient to assert that the Building Permit Fee and the Brokerage Fee were conditional on the sale of the Property at the Expected Sale Price Range. Even if it is not apparent from the Federal Supreme Court’s reasoning, it can be recalled that even if a suspensive condition may be tacit, its existence must still be inferred from the interpretation of the contract, the circumstances or the general context.[2] In this respect, the Client claimed that the Cantonal Court only examined the wording of the Agreement before rejecting the existence of a suspensive condition. It is certain that a sole analysis of the wording of a contract might be insufficient to determine the will of the parties, especially if a party is able to demonstrate that the interpretation is untenable by providing other relevant evidence contradicting the wording of the contract. In this case, however, the Federal Supreme Court’s decision clearly states that the Cantonal Court also took into account factual elements subsequent to the conclusion of the Agreement, which confirmed its interpretation of the text of the Agreement (see section 1 above). In the absence of any concrete evidence to contradict the Cantonal Court’s interpretation, the Federal Supreme Court rightly held that the Client failed to demonstrate that the Parties had made the Building Permit Fee and the Brokerage Fee conditional on the sale of the Property within the Expected Sale Price Range.

The Federal Supreme Court also rejected the Client’s argument that the total remuneration of the Architect, amounting to 40% of the gain made by the Client from the Sale of the Property led to a shocking result. The Client claimed a violation of her right to be heard in this regard, by alleging that the Cantonal Court had not analyzed the issue of the breach of the Agreement allegedly committed by the Architect. However, the Federal Supreme Court held that the Cantonal Court, in its interpretation of the unclear claim raised by the Client, had found that the Client had not demonstrated that the circumstances had changed in an inevitable and unforeseeable manner, as required by the theory of unforeseeability (“clausula rebus sic stantibus”), and that the sale of the Property at a lower-than-expected price could consequently not be considered as such. Therefore, the Federal Supreme Court rightly held that the Cantonal Court had not violated the right to be heard of the Client. Additionally, it can be noted that although the Federal Supreme Court did not refer to Art. 417 SCO with regard to this Client’s argument, it still concluded in its judgment that there was no reason to apply this provision in this case in order to reduce the Brokerage Fee (see supra section 2 above).

Finally, it is interesting to note that the Federal Supreme Court did not have the opportunity to rule on the requirement of a causal link between the Architect’s activity and the sale of the Property in relation to the Architect’s right to the Brokerage Fee. The Agreement provided that the Brokerage fee was due in the event that the Architect “[found] a buyer for an amount that is acceptable to [the Client]”. Based on this wording, it could be argued that, to be entitled to the Brokerage Fee, the Architect had to have a real influence on the sale of the Property, including on the final price accepted by the Client. It is therefore questionable whether it was sufficient for the Architect to simply put the Client in touch with the CEO of the Neighbor Company to obtain the Brokerage Fee. The negotiations led in part by the Architect were never successful due to a disagreement on the sale price. Therefore, the Architect had no further influence on the subsequent sale of the Property, specifically the final sale price. Given that the Cantonal Court refused to consider the matter because of a lack of sufficient arguments in the Client’s appeal and thus holding that the requirement of the existence of a causal link was met, the Federal Supreme Court was unfortunately unable to consider this issue.

[1] For an in depth study of this topic, see Mélanie Tritten, Les contrats complexes et les complexes de contrat – Étude sur les contrats liés en droit suisse, Genève, Zurich (Schulthess) 2024, N 258 et seq.

[2] Pascal Pichonnaz, in: Luc Thévenoz/Franz Werro (edit.), Commentaire romand, Code des obligations I, 3rd ed., Basel (Helbing Lichtenhahn) 2021, Art. 151 N 2; Mélanie Tritten, Les contrats complexes et les complexes de contrat – Étude sur les contrats liés en droit suisse, Genève, Zurich (Schulthess) 2024, N 375.

Reproduction authorized with the following reference: Mélanie Tritten, "No Causation, No Commission, Even If the Agent Had Identified the Buyer?", published on: Swiss Contract Law, October 15, 2025, https://scl.cultureweb.ch/46/



Liable for remaining silent: Broker found liable for failing to disclose relevant information which had an impact on the sale of his client’s apartment

A broker was held liable for breach of contractual obligations to his client by failing to disclose relevant information regarding the potential sale of his client’s apartment at a higher price.

Judgment of the Federal Supreme Court of 5 May 2021
Case Reference : 4A_229/2020

Facts

The dispute concerns the following (summarised) facts:

The owner of an apartment (also known as the Owner or the Principal in a brokerage contract) had contacted a broker (hereafter the Broker) who introduced her to a buyer (hereafter the Buyer).

The Buyer had put in an offer to purchase the Owner’s apartment for CHF 2,100,000 through the Broker, which the Owner had accepted immediately. However, the Broker did not disclose the acceptance to the Buyer.

At the same time, the Buyer had planned to buy another (more expensive) apartment, however the Broker later learned that he could not follow through with this plan because he had not been able to obtain the required financing. Nonetheless, the Broker did not inform the Buyer that it was still possible to acquire the Owner’s apartment (knowing that the Broker had not previously informed the Buyer that the Owner had accepted the purchase offer).

Given that the Owner had not found an interested buyer for the desired price of CHF 2,100,000 (even though the Buyer had in fact made an offer at this price), she agreed to reduce the sale price of the apartment to CHF 2,000,000.

Through another broker, the Buyer ultimately bought the Owner’s apartment for CHF 2,000,000.

Following a first legal proceeding, the Owner was ordered to pay the Broker CHF 20,000 for having provided the Owner with the name of the Buyer who ultimately bought the apartment. In this first trial, the Broker’s fees were reduced by CHF 10,000.

The Owner sued the Broker for breach of the brokerage contract and for the damage suffered as a result of failing – on the part of the Broker – to sell the apartment for CHF 2,100,000 (the price the Buyer was initially willing to pay), which the Owner calculated at CHF 87,000.

Issue

The issue in this case is whether the Broker broke its contractual obligations and, if so, what are the damages that the Broker should pay the Principal.

Decision

  1. The definition of brokerage contract and the Broker’s contractual liability

The Federal Supreme Court first reviewed the definition of brokerage contract and the Broker’s contractual liability.

According to Art. 412 para. 1 of the Swiss Code of Obligations (SCO), a brokerage contract is a contract whereby the Broker is instructed to alert the Principal to an opportunity to conclude a contract (indication brokerage) or to facilitate the conclusion of a contract in exchange for a fee (negotiation brokerage).

As a matter of principle, the broker has no obligation to be active (and can thus remain inactive). However, once the broker becomes active, the broker is liable for the proper and faithful execution of the contract (Art. 398 para. 2 SCO applicable by reference from Art. 412 para. 2 SCO). Art. 398 para. 1 SCO refers to the rules governing the liability of the worker in the employment relationship, that is to say to Art. 321e SCO. It follows that the liability of the Broker presupposes that four cumulative conditions are met: (1) a breach of a duty of care, (2) a damage, (3) a relationship of causality (natural and adequate) between the culpable breach of the duty of care and the damage that has occurred, and (4) a fault. The onus is on the Principal to provide proof of the facts showing that each of these conditions has been met (Art. 8 of the Swiss Civil Code [SCC]), except for the alleged fault (Art. 97 para. 1 SCO).

In this case, the Federal Supreme Court found that the parties were bound by an indication and negotiation brokerage contract. It also held that all four conditions of the contractual liability of the Broker had been fulfilled and that the cantonal court had not erred in arbitrariness when stating the facts.

  1. Loss of an opportunity theory

The Federal Supreme Court analysed the loss of an opportunity theory on which the Broker relied in an attempt to deny his contractual liability. The Broker claimed that the Principal had not suffered any damage on the grounds that the Principal would have merely lost an opportunity to sell her apartment at the price of CHF 2,100,000, knowing that the loss of an opportunity does not lead to damage claims under Swiss law. The Federal Supreme Court recalled that, based on the loss of an opportunity theory, the repairable damage consists of the loss of a measurable chance of an actual gain or of avoiding harm. It thus corresponds to the probability for the injured party obtaining this profit or not suffering any harm. The value of the lost opportunity is in principle the value of the total stake multiplied by the probability of obtaining it. The reasoning behind this method is to limit compensation to the damage that corresponds to the degree of probability of damage caused by the liable party.

However, the Federal Supreme Court noted that, in addition to the fact that the loss of an opportunity theory is not applicable under Swiss law, the Broker had wrongly invoked it. In fact, the Principal had not been deprived of an opportunity to a gain, but the fact that the Broker had violated its obligations of due diligence had directly deprived the Principal of the gain in question (i.e. the gain resulting from the sale of the apartment at a higher price, keeping in mind that the Principal had accepted the offer made by the Buyer and that the Broker had failed to notify the Buyer of the Owner’s acceptance).

  1. No reduction of the damage claim

The Federal Supreme Court also had to decide whether the damage claim raised by the Principal should be reduced on the grounds that the Principal would have caused her own damage by reducing the sale price of her apartment (as claimed by the Broker) by application of Art. 44 SCO thus challenging the establishment of a causal link between the breach of contract committed by the Broker and the damage suffered by the Principal. The Federal Supreme Court ultimately established a causal link between the breach of contract committed by the Broker (i.e. failure to disclose information) and the damages suffered by the Principal, and dismissed the claim brought forth by the Broker based on Art. 44 SCO.

  1. The amount of the damage

Lastly, the Federal Supreme Court had to determine the amount of damages to award to the Principal as a result of the breach of contract committed by the Broker. The Broker claimed in this respect that the Principal could not claim full damages (i.e. CHF 87,000) given that the other legal proceedings had reduced the Broker’s fees by CHF 10,000. The Federal Supreme Court had to determine whether it is possible to combine the Principal’s right to compensation for the damage caused by the improper performance of contractual obligations (Art. 398 para. 1-2 SCO applicable by reference from Art. 412 para. 2 SCO) and the Principal’s right to a reduction of the Broker’s fees (Art. 394 para. 3 SCO applicable by reference from Art. 412 para. 2 SCO) in the event of a breach of the brokerage contract. The Federal Supreme Court stated (in line with its case law) that the compensation for the damage shall not allow the Principal to obtain a second compensation for the same purpose, that is to say compensation by reduction of fees and in addition to compensation for damages. In application by analogy of Art. 397 para. 2 SCO, case law has thus admitted that if the broker has already remedied the damage that he/she had caused, it can be considered as if he/she had correctly performed the brokerage contract and thus be entitled to full fees.

In this case, the Federal Supreme Court decided that the Principal was not entitled to receive a second compensation for damages, in view of what had already been awarded to her in the other case (i.e. a reduction of the Broker’s fees of CHF 10,000). Consequently, the Broker, whose fees were reduced in the first proceedings, was entitled to either the reduction of CHF 10,000 or owed the amount to be allocated in the second trial. The Federal Supreme Court admitted part of this claim and set the Principal’s damage at CHF 77,000 by taking into account the reduction of CHF 10,000 in fees which had been obtained in the related case concerning the amount of Broker fees.

In conclusion, the Federal Supreme Court granted the appeal and ordered the Broker to pay CHF 77,000 (plus interest).

Key takeaway

This case constitutes an important reminder of the conditions related to the broker’s contractual liability and of the risks that a broker faces if the broker does not disclose relevant information that may lead to the conclusion of a contract for his/her client.

Comments

The judgment prompts three comments.

1) This judgment is interesting because it shows that, even though as a matter of principle, a broker has no obligation to be active (and can thus remain inactive). Once a broker becomes active, he/she becomes liable for the proper and faithful execution of the contract (Art. 398 para. 2 SCO). In this case, this meant that the Broker had to actively disclose the relevant information with its client in order to facilitate the sale of the apartment: the Broker’s silence triggered its contractual liability. Consequently, once the Broker became active, it had to remain active and to actively disclose any information. In this context, the Federal Supreme Court rightly did not apply Art. 321e para. 2 SCO (the extent of the duty of care) to the Broker’s contractual liability even if Art. 412 para. 2 and Art. 398 para. 1 SCO refer to the rules of the employment contract regarding the liability of the employees and thus to Art. 321e SCO. According to Art. 321e para. 2 SCO, “the extent of the duty of care owed by the employee is determined by the individual employment contract, taking due account of the occupational risk, level of training and technical knowledge associated with the work as well as the employee’s aptitudes and skills of which the employer was or should have been aware.” As mentioned in our PhD thesis (Kaveh Mirfakhraei, Les indemnités de fin de contrat dans le contrat d’agence et le contrat de distribution exclusive, Basel/Zurich/Geneva 2014, p. 135-136, N 449), Art. 321e para. 2 SCO (the extent of the duty of care) is specific to the employment contract.

2) Instead of dismissing the loss of an opportunity theory from the outset, the Federal Supreme Court examined it before determining that it was inadmissible under Swiss law and that the appellant had wrongly invoked it. We believe that by doing so, the Federal Supreme Court left the door open to the possibility of admitting the loss of an opportunity theory in future cases.

3) The Federal Supreme Court confirmed its previous case law whereby a Principal who suffers a loss resulting from a contractual breach committed by the Agent cannot cumulatively claim full damages and a reduction of the fees due to the Agent. The Federal Supreme Court decided that, in application of Art. 397 para. 2 SCO, if the Agent has remedied the damage caused, the it can be considered that the Agent had correctly performed the mandate and consequently be entitled to full fees. One should, however, note that this issue is controversial and is still a subject of debate in legal literature (see e.g. Franz Werro, Le mandat et ses effets, thesis Fribourg 1993, N 1069; see also the doctrinal sources cited in the Judgment of the Federal Supreme Court of 5 March 2014, case reference 4A_364/2013).

Reproduction authorized with the following reference : , "No Causation, No Commission, Even If the Agent Had Identified the Buyer?", published on: Swiss Contract Law, October 15, 2025, https://scl.cultureweb.ch/46/