Increasing Deposit #2

By Gerry Neely
B.A. LL.B.

Every vendor wants as large a deposit as possible, while no potential purchaser wants to tie up a relatively large sum if he is unable to get the financing which is the condition precedent to his purchase of the vendor's property. As a result, the offer to purchase may contain the following provisions:

1. The sum of $1,000.00 by way of deposit and part payment against the purchase price.
2. A further cash payment of $9,000.00 when the financing has been approved.

Does No. 2 above mean the same as the following No. 2?

1. The deposit shall be increased by a further cash payment of $9,000.00 when the financing has been approved.

Both paragraphs No. 2 may be interpreted to mean the same; namely, that the further cash payment of $9,000.00 is paid as part of the deposit. However, the use of the first No. 2 gives a vendor who does not want to complete the sale an argument that the sum of $9,000.00 was a deferred payment (i.e. part of the balance of the purchase price) rather than part of the deposit. As such, it should have been paid directly to the vendor, rather than to the agent. Payment to the agent, therefore, was not sufficient tender by the purchaser to give the purchaser the right to sue for specific performance. The principle of law behind this argument is that generally a vendor's agent who is appointed for the purpose of seeking and receiving offers to purchase has the authority to receive the initial or down payment, but has no implied authority to receive further installments of the purchase price. This statement of principle depends upon the facts, and the Court may, as it did in the case in question, find that the additional cash payment of $9,000.00 formed part of the deposit. However, the argument would have been avoided had the second provision No. 2 been used.

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