Once a Contract of Purchase and Sale (CPS) has been accepted, a party can’t unilaterally alter its terms. If a party insists on changing the deal or otherwise indicates that they are unable or unwilling to fulfill their contractual obligations when due, they risk repudiating (i.e., rejecting) the contract.

REALTORS® should be aware that their actions and / or communications which signal their clients’ refusal to honour the terms of the CPS can form the basis of anticipatory repudiation. This can give the other party an option to immediately terminate the CPS and pursue legal remedies, effectively killing the deal.  

Anticipatory Repudiation in Real Estate Transactions

In the context of a residential real estate transaction, anticipatory repudiation can occur when a party clearly indicates, in advance, that they won’t fulfill a term in the CPS which deprives the other party of the contract’s primary benefits. While this concept seems simple, its application can be complex and highly fact dependent. A party can signal their intention not to perform or be bound by the provisions of the CPS in various ways, sometimes even inadvertently, such as demanding changes to key terms.

Examples of Anticipatory Repudiation

Determining whether anticipatory repudiation has occurred will depend on the terms of the CPS and the specific circumstances. A key question is whether a reasonable person would conclude that the defaulting party no longer intends to be bound by the agreement. Some scenarios that may give rise to anticipatory repudiation include:

• a buyer or seller indicating that they won’t close the transaction on the completion date;
• a buyer or seller indicating that they are unable or unwilling to comply with a material term in the CPS, such as vacant possession, title, purchase price, or completion date;
• a buyer refusing to pay the required deposit;
• a buyer or seller refusing to complete the transaction unless there are material changes to the terms of the CPS; and
• a buyer or seller repeatedly requesting to extend the completion date.

While these examples are intended to provide some guidance, they are not exhaustive. Clear-cut answers are also rare, if not impossible. Luckily, as a REALTOR®, you don't need to have all the answers to protect yourself and your clients from the dangers of anticipatory repudiation.

Navigating Dangerous Waters: Tips for REALTORS®

As a REALTOR®, you should be mindful of situations where actions or words can be seen as repudiating the CPS. Here are some tips that REALTORS® should keep in mind to avoid putting themselves (and their clients) at risk.

• REALTORS® should promptly advise their clients to seek independent legal advice if they express any concerns about fulfilling their contractual obligations or wish to terminate the CPS. Similarly, a REALTOR® should recommend that their clients consult a lawyer if they suspect that anticipatory repudiation has occurred or may occur and to refrain from dispensing legal advice (i.e., declaring a contract dead or alive).

• REALTORS® owe their clients a duty of confidentiality. Do not disclose confidential information, such as your clients' unwillingness or inability to meet their contractual obligations, without their explicit instructions and without recommending that they seek independent legal advice first. Sharing such details could be seen as an anticipatory repudiation and may inadvertently “kill the deal.”

• Think carefully before attempting to re-negotiate the CPS on behalf of a client. If your clients require significant / substantial amendments, you should recommend independent legal advice before proceeding. By promptly recommending legal advice, you ensure your clients receive the professional support they need while shifting potential liability to an appropriate legal expert. Also, see Amy Peck’s Legally Speaking #565 about amending real estate contracts.

•  If you are re-negotiating terms on behalf of your clients, beware that overly bullish or demanding language can amount to contract repudiation. In Zoleta v. Singh and RE/MAX Twin City Realty¹, the Superior Court of Ontario held that the purchaser’s lawyer’s demand, rather than a request for a price reduction, amounted to a repudiation of the contract. Specifically, by requiring a reduction in the purchase price, the Court found that the purchaser had signalled to the vendor that he would not complete the purchase unless the vendors agreed to a price change.

A Quick Word of Caution: Back-Up Offers

A back-up offer is typically contingent on a seller no longer being obligated under a previously accepted CPS. In this regard, anticipatory repudiation by the first buyer may potentially release the seller from their obligations and activate the back-up offer. Therefore, any proposed amendments to an original offer, when a back-up offer is in place, should be approached with caution. If a significant change to the original contract is being proposed or demanded, a seller’s agent should advise their clients to seek independent legal advice regarding their obligations before proceeding. This helps ensure that the proposed amendment does not unintentionally bind a seller to two contracts.

Final Reflections

Navigating a deal that takes an unexpected turn can be challenging, and REALTORS® may feel the urge to help renegotiate terms to keep things on track. However, if your clients are unable or unwilling to proceed under the original terms of the CPS, it’s important to encourage them to seek independent legal advice promptly. Be aware that your actions and choice of words can have significant legal consequences, potentially triggering an anticipatory repudiation. This could lead to the termination of the contract and legal claims against both you and your clients. By following the tips outlined above, you can help protect yourself and your clients from potential risks.

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Zoleta v. Singh and RE/MAX Twin City Realty, 2023 ONSC 5898 (CanLII).

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