Brokerage is a contract under which the broker undertakes to mediate between two parties to conclude a deal in return for a fee (commission). The Kuwaiti Commercial Code regulates brokerage and defines the rights and obligations of the parties.
Difference from agency: the broker only mediates — they do not represent either party and do not conclude the contract in their own name. An agent acts and binds their principal.
Contents
1) The Concept of Brokerage
- Definition: a contract under which the broker undertakes to find a counterparty for a specified contract and mediate its conclusion — in return for a fee.
- Commercial act: brokerage is commercial by nature — governed by the Commercial Code.
- Mediation only: the broker brings the parties together but is not a party to the contract they facilitate.
- Independence: the broker is independent — not subject to the client's authority or supervision.
Commercial Code: Articles 306 to 316 of the Kuwaiti Commercial Code govern brokerage contracts.
2) Broker's Obligations
- Diligence: exercising reasonable effort to find the counterparty and complete the deal.
- Integrity: informing the client of all material information relating to the deal.
- Impartiality: not favouring one party's interest over the other — especially when mediating for both.
- Confidentiality: maintaining the confidentiality of information obtained in the course of their work.
- No self-dealing: not purchasing on their own account in deals they are mediating.
3) Client's Obligations
- Paying the commission: paying the agreed fee upon completion of the deal.
- Cooperation: providing necessary information and facilitating the broker's work.
- Good faith: not contracting directly with the counterparty found by the broker to circumvent the commission.
- Expenses: bearing agreed expenses if any.
Circumventing the commission: if the client contracts directly with the counterparty found by the broker — to evade the commission — they remain liable to pay it in full.
4) Commission and Fee Rights
When commission is earned
- Earned upon completion of the deal as a result of the broker's mediation.
- A causal link between the broker's mediation and the conclusion of the contract.
- Not earned if the deal falls through — unless otherwise agreed.
- Earned even if the contract is concluded on terms different from the initial ones.
Determining the commission
- By agreement between the parties.
- According to commercial custom if not agreed.
- Assessed by the court in case of dispute.
- Typically a percentage of the deal's value.
5) Real-Estate Brokerage
- Significance: real-estate brokerage is the most widespread type in Kuwait.
- Licensing: the law requires real-estate brokers to obtain a licence from the competent authorities.
- Customary commission: custom in Kuwait is 1% of the real-estate transaction value from each party.
- Disclosure: the broker must disclose the property's condition and any defects or legal encumbrances.
Registration: the real-estate broker connects the parties — but ownership is only transferred upon registration in the Land Registry. See property sale and pre-emption.
6) Legal Liability
- Breach of integrity: the broker is liable for any damage resulting from failure to disclose material information.
- False information: if the broker provides false information that harms the client, they bear compensation.
- Forfeiture of commission: the commission is forfeited if the broker is proven to have colluded with the counterparty against their client's interest.
- No performance guarantee: the broker does not guarantee performance of the contract — unless they expressly undertook to do so.
7) Termination
- Deal completion: the contract ends upon completion of the deal and earning of the commission.
- Expiry of term: if the contract was for a fixed term that expires without a deal.
- Mutual cancellation: the parties may agree to terminate.
- Rescission: either party may rescind if the other materially breaches their obligations.
Post-termination: if the deal is concluded after the contract ends with the counterparty introduced by the broker, the commission is still owed if the broker proves the deal resulted from their efforts. See contracts and obligations.
8) Practical Guidance
For the broker
- Document the brokerage agreement in writing — specify the commission and term.
- Keep evidence of your mediation efforts.
- Disclose all information and do not exaggerate.
- Obtain the necessary licence for your activity.
For the client
- Agree in writing on the commission rate and when it is earned.
- Verify the broker's licence and credibility.
- Do not circumvent the commission — the law protects it.
- Consult a lawyer in case of a commission dispute.
Need to draft a brokerage contract or claim an earned commission? Contact Attorney Meshari Obaid Al-Enezi — Yumnaak Law Firm.
