Actions Against Licensees – Negligence and Interfering With Contractual Relations #152
CATEGORY: Legally Speaking
TAGS: Breach of Contract Breach of Duty Court of Appeal Foreclosure Misrepresentation Negligence
By Gerry Neely
Chutzpah is a Yiddish word meaning "brazen nerve". An example of chutzpa is the story of a young man who was found guilty of the murder of his parents and then at the time of sentencing, asked the Judge to show mercy because he was an orphan. Licensees who suspect from the spate of litigation that arose in the '80s, that dissatisfied vendors or purchasers of real estate will sue the licensees upon any pretext, will find support for their suspicions and another example of chutzpa in the report of the following decision.
Purchasers who wanted property with some outbuildings, were shown property which appeared to have a 35 foot backyard with one outbuilding. The vendor accompanied the purchasers on their examination of the property, and pointed out to them the spot where he assumed the cornerpost was located. The purchasers completed their purchase and subsequently discovered that the actual location of the cornerpost left them with little backyard and the outbuilding on the adjoining property. The purchasers were awarded damages for the fraudulent misrepresentation of the vendor.
The vendor then sued the agent for the agent's breach of duty to the vendors. While the reasons for judgement are silent, obviously the vendor's argument was that the agent had a duty to know the location of the boundaries because of the purchaser's wish to buy property with an outbuilding.
This case went to the Court of Appeal where the Court of Appeal said "it defies common sense that a principal that has been found liable in damages for a fraudulent misrepresentation may sue his agent, alleging that the agent failed to correct the misrepresentation. The vendor in this case was responsible for, and caused the loss to himself and to his wife". The action against the agent was dismissed.1
* * *
The submission of offers to purchase property which is in foreclosure can often be baffling or frustrating to licensees. In one case John offered to purchase such property through an agent. A second purchaser, Mary, made a slightly higher offer through another agent. This was accepted by the bank, subject to Court approval. Both offers were submitted, but not accepted because the owner obtained an adjournment. The bank's solicitor suggested to John and Mary that they deliver sealed envelopes to him with their final offers, upon their understanding that this would be binding upon them. They did this, but over the objections of the second agent, both envelopes were opened by the bank's solicitor. He advised John and Mary that since John's offer was higher, it would be submitted to the Court.
Mary decided to submit a higher offer through the second agent. While the salesperson was uncertain initially whether the agency could lawfully or ethically do this, her manager concluded that the salesperson should submit the higher offer on behalf of Mary. At the hearing of the bank's application to confirm the sale, John objected to the Judge receiving the second offer because of the agreement made with the bank's solicitor. The judge directed both parties to submit further sealed bids by 2:00 p.m. that afternoon. When they were opened, Mary's offer was higher and accepted, thus the judge approved the sale to her.
John then sued Mary, the second agent, its manager and the salesperson. He alleged a breach of contract against Mary and as against the agent, damages for interference with contractual relations. At issue was the effect of the agreement made with the bank's solicitor. There was no doubt that there had been an agreement, but did it create a legal relationship between John and Mary which the Court could enforce?
The judge was critical of the arrangement proposed by the bank's solicitor because it might prevent the best price from being obtained for the property. He concluded that there was no consideration between the parties which would form the basis for the contract to exist, and dismissed the claim against Mary and the licensees.
This does not mean that parties such as John and Mary cannot contract to bind themselves to a similar arrangement. But if they do, and one of them breaches the contract and re-submits a higher offer, the Court may accept that offer to obtain the best price possible for the owner or creditors. However, while breach of the agreement may not give the injured party the property, it would give that party a remedy in damages against the defaulting party.2
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