"And/or Nominee" and "And/or Assignee" #65
By Gerry Neely
A request has been received for an update of the current law relating to the use of the above phrases in the preparation and enforcement of interim agreements.
Column No. 3 written March, 1981, referred to a case where an offer to purchase made by "the undersigned, Century 21 Real Estate Ltd. or nominee" was held to be unenforceable. One reason for this decision was the uncertainty as to who was the intended purchaser. The transaction was quite unusual in that the vendor retained the right to arrange the first and second mortgage financing required to pay out the vendor. This meant that the identification of the purchaser was important since it was his financial strength or creditworthiness that would determine whether the financing would be made available.
Since that case, there have been five reported decisions in British Columbia of which I am aware, in which one party to an agreement to purchase land has argued that these phrases render the agreements void for uncertainty. The uncertainty cases appear to have sprung from a case in which a proposed tenant entered into an agreement to lease with the landlord. The tenant stated that he did not intend to be personally liable, but that the liability would be that of a company to be incorporated by him. The landlord had a different understanding as to the liability of the tenant, and the Court concluded that the uncertainty created by these difference understandings meant that no contract had been concluded and the tenant was absolved from any personal liability.1
A general rule seems to be evolving from the most recent decisions in the cases where the argument was unsuccessful. That rule is that if it can be established that the purchaser's decision to nominate someone else to take title is not intended to relieve the purchaser of his obligations toward the vendor, then the agreement is not void for uncertainty.2An example would be circumstances in which the purchaser intends to incorporate a company to take title, but understands that he remains liable personally until that happens.
If, however, the evidence establishes that the purchaser never intended to bind himself in contract to the vendor personally, but instead intended that the vendor and a third party to be nominated by the purchaser were to contract with each other, then the contract would probably be void for uncertainty. An example of this is the landlord/tenant case referred to above.
The problem in putting this rule into practice is the difficulty in proving the intentions of the purchaser. If a purchaser wishes to have a nominee take title, then to avoid the uncertainty argument, the agreement should contain a sentence similar to the following:
"The purchaser agrees to remain liable to the vendor under this agreement notwithstanding that the purchaser may nominate a third party to complete this purchase."
If the vendor intends to take back a mortgage, then the sentence could be amended as follows:
"The purchaser agrees to remain liable to the vendor not only under this agreement but also as a guarantor under the said (first) (second) mortgage notwithstanding that the purchaser may nominate a third party to complete this purchase."
|1.||Causeway Shopping Centre Ltd. v. Muise, (1967) 63 D.L.R. (2d) 26, affirmed 70 D.L.R. (2d) 720.|
|2.||Kemp v. Lee, 44 B.C.L.R. p. 172.|
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