Best Efforts Condition Precedent #209
By Gerry Neely
Whether a condition precedent falls within the "whim or fancy" or "option or offer" category of conditions, or within the category that requires purchasers to use their best efforts to satisfy the conditions, is a question judges continue to be asked. Since the cases depend upon different facts, they may appear to be contradictory or inconsistent. For example, "subject to the sale of the purchaser's residence" is a best efforts category while "subject to the purchaser's review of leases" falls within the "whim and fancy" cases. (See Column #163 for a fuller discussion of consequences.)
The reports of cases in which condition precedents are interpreted may provide a useful list of clauses and the categories into which they fall. The condition precedent in one case was that completion was "subject to the purchaser's review and approval of easements #___ and #___." The easements were for driveways which were in place and which crossed the vendor's land. The purchaser was concerned that the driveways might not have been constructed within the area described in the registered right of way agreement.
The purchase satisfied himself that their location on the ground was consistent with the description in the right of way agreement, and orally told the vendors that the easements were acceptable to him. Before completion the vendor attempted to revoke the contract by saying that the condition precedent fell within the "whim or fancy" category of conditions. The vendor's argument was that the removal of the condition depended solely upon the subjective state of mind of the purchaser, who could refuse to approve the easements without attempting to justify that decision.
The judge, however, held that the purchaser couldn't avoid his obligation to complete the purchase by refusing to approve the easements without justifiable reason. A binding contract was created when the parties signed it, although its completion was subject to the removal of the condition. The purchaser had to use his best efforts and the vendor could not terminate the contract on the basis that the condition precedent rendered the contract unenforceable.1
Column #186 discussed a case where a licensee, who knew nothing of a zoning bylaw which prevented construction upon the front seven feet of a building lot, was held to be responsible for an innocent misrepresentation by omission. This allowed a purchaser to repudiate the Contract of Purchase and Sale, and exposed the licensees to an action for damages by the vendor.
The trial judge had concluded that the zoning bylaw was equivalent to an unrevealed easement which constituted a serious cloud on title. The Court of Appeal disagreed, holding that the zoning restriction was the equivalent of a set back. Although the zoning bylaw created a restriction on the enjoyment of the property in order to preserve the amenities of the neighbourhood, it was not a cloud on title.2 (This case and this decision should be contrasted with the facts and the decision referred to in Column #187.)
Several columns have discussed cases involving loans where the interest rate exceeded the limit of 60% fixed by the Criminal Code of Canada. Those cases involved defaulting borrowers who used the criminal rate of interest as a defense against an action by the lenders for payment of interest. A recent case involved a borrower who had paid the interest and was trying to recover it. Normally monies paid under an illegal contract such as this are not recoverable. One reason for allowing recovery is that the Criminal Code section is there for the protection of borrowers. However, the Criminal Code section became law to protect "the weak and needy from unscrupulous, oppressive and sometimes violent makers of small loans."
The borrower in this case was experienced and not a weak borrower. The lender was not an oppressive lender. The judge held that interest was not recoverable because the Criminal Code section was not intended to protect the sophisticated borrower from this kind of lender.3
|1.||Hague v. McEachern, S.C.B.C., Nanaimo Registry #03235, (Reasons for Judgement, June 15, 1993).|
|2.||Tunner v. Novak, 76 B.C.L.R. (2d) 255.|
|3.||Don Street Developments Ltd. v. Terracan Capital Corp., 76 B.C.L.R. 2nd 90.|
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