Negligent Preparation of an Offer - Liability of Licensee for Damages #111

By Gerry Neely
B.A. LL.B

A month later Adam and Nester were back in Noel's office, this time with a letter from the vendor's lawyer. The letter contained a consent to the release of the deposit, but sought damages for negligence and breach of duty. The negligence lay in drafting an unenforceable offer and the breach of duty was the failure to carry out the vendor's instructions. Nester, or as the boys at the office called him, Nudie, had been riding high as a result of some unexpected public exposure given to him by the Province in a story that featured the significance of his buff coloured business cards carrying the slogan "Deal with a salesman who has nothing to hide". The prospects of being sued for damages had, at least temporarily, grounded Nester.

Noel finished reading the letter and said to Nester, "The negligence complained about is the addition by you of the conditional clause that completion was subject to the purchaser obtaining satisfactory personal financing. As you will recall, I advised you this clause was too uncertain and the contract would in all likelihood be found to be unenforceable. If the vendor can prove damages, and that's something we'll talk about later, then the vendor should be able to recover those damages from you and the agency.

"Last year a judge had to consider a claim for damages in what we all hope is the last case involving the 1981 fall in prices. In that case, a vendor negotiated with a purchaser over a couple of weeks, during which several agreements either extending time or reducing the amount of the deposit were signed. After the extended time had expired, the licensee brought an offer amending the expired offer. It contained the terms agreed upon between the vendor and purchaser, but it also contained a clause referring to bridge financing to be provided to the purchaser. This clause was important to the purchaser but not strictly relevant to the agreement between the vendor and purchaser. The clause merely stated that 'X Financial Institution shall give $50,000.00 for bridge financing at C.I.R.'. This was confusing to the vendor and his lawyer because it left them wondering whether it was intended to be a condition, or a statement of a commitment already made. The vendor's lawyer suggested changes to clarify the meaning of the agreement, including the deletion of this clause.

"The vendor asked the agent to discuss this with the purchaser before the changes were made to see if they were satisfactory. The vendor told the agent he did not want to risk the deal and would have accepted the offer, blemishes and all, to avoid this. The licensee refused to take back the offer until the changes were initialled, and, when all of this was done, the purchaser treated the changes as a counter-offer and rejected it. Six months later, the house was sold at a substantial loss.

"The purchaser, the agency and the licensees were all sued by the vendor. The judge agreed with the purchaser that the purchaser was not liable because the changes made to the offer constituted a counter-offer, which he was entitled to reject. The agency and licensees were held to be liable in damages because, as the judge said, 'it was unskillful drafting which scuttled this deal'. In holding that the licensees were liable in damages, the judge made the following remarks, the substance of which has been found in a number of cases dealing with licensee's negligence: 'A real estate agent in this Province must be qualified and licensed. He and his brethren have a statutory monopoly with all the advantages and burdens that that status bestows. He, in my view, holds himself out as having some special skills and not the least of this is some ability to draft legally enforceable documents relating to this business.'

"The other problem for the licensee in this case was his refusal to do what the vendor had asked him to do, which was to see if the purchaser would accept the changes before the vendor actually made them. Whether that would have saved the sale is unknown, but the judge did hold that this was a breach of the licensee's duty which contributed to the collapse of the deal."

Noel turned to Adam. "That is the bad news, but the good news is that the vendor must prove that he actually suffered damage as a result of your actions. Since we are in a rising market, he may not be able to do that."¹

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