Jul 01, 2006

Seller Entitled to Refuse Uncertified Third-Party Deposit; Ask Gerry #397


By Gerry Neely
B.A. LL.B.

In a case where a seller refused to accept a deposit cheque, a Supreme Court judge gave an answer to a problem we didn’t know we had in the Contract of Purchase and Sale (CPS).

The seller had agreed to sell his property for $975,000, but wanted the buyer to pay the deposit of $20,000 directly to him. The second paragraph of the CPS, the deposit section, was altered by the handwritten addition: “Upon all subject removals $20,000 will be paid to (seller) and become non-refundable.”

Immediately following this sentence, the printed portion of the second paragraph reads as follows: “All monies paid pursuant to this section (Deposit) will be delivered in trust to (brokerage) and held in trust in accordance with the provisions of the Real Estate Act.” This sentence wasn’t deleted, but should’ve been because of the obvious conflict between it and the previous sentence.

The conditions were removed on the last day available to the buyer, who delivered the deposit late to the listing agent in the evening. This is where the contract went sideways—two deposit cheques were issued by business partners of the buyer, who were neither parties to the contract nor known to the seller. The seller refused to accept a replacement cheque from the buyer the following day. He asserted that the tender of payment pursuant to paragraph 10 was defective because time was of the essence, and delivery of the buyer’s cheque was too late. As per paragraph 10 of the CPS, “Tender or payment of monies by the Buyer to the Seller will be by certified cheque, bank draft, cash or Lawyer’s/Notary’s trust cheque.”

When the buyer sued for specific performance, the seller contended the cheques weren’t certified. The buyer’s argument was that paragraph 10 only applied to the tender of monies payable on completion, an argument supported by evidence that this was the custom in real estate transactions. However, the judge didn’t agree that paragraph 10 should be interpreted as if “monies” and “the balance of the purchase price” meant the same.

The seller’s defence that he should’ve received the buyer’s certified deposit cheque succeeded. Because of this decision, the judge didn’t deal with the question of whether the use of third-party cheques breached paragraph 10.1

A licensee asked whether a CPS that’s subject to a buyer arranging financing is too uncertain to be enforceable. Decisions from the late 1980s held that contracts subject to “satisfactory personal financing,” “suitable financing” and “satisfactory mortgage” were all uncertain.2 However, column 121 discusses the interpretation of a contract conditional upon the buyer being able to “arrange satisfactory financing.” The BC Court of Appeal decided this wording had “ascertainable meaning” and was not uncertain. This decision was followed in the BC Supreme Court case referred to in column 214.

Another licensee asked whether a disappointed buyer’s agent, whose offer at the price and upon the terms of the Multiple Listing Contract was rejected by the seller, could sue the listing agent for the share of commission offered to a buyer’s agent. The answer is no. The listing agent only agrees to pay a portion of the commission to the buyer’s agent who assists in obtaining someone who buys the property, not someone whose offer is rejected. See column 307 for more information.

  1. Germain v. Kapchinsky, SCBC, Kelowna Registry, Reasons for Judgment, February 23, 2006.
  2. Legally Speaking 110.

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