No Commission on Building Contract Where Agent Failed to Disclose #220

Jun 12, 1994

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By Gerry Neely
B.A., LL.B.

Possession under the Contract of Purchase and Sale works well when possession is the day after completion, but not as well when both are on the same date. In the latter instance, unless the vendor's lawyer has the sale proceeds or is satisfied that they are forthcoming, a demand by a purchaser for vacant possession at 12 noon is likely to be denied.

Fortunately most people cooperate with each other because otherwise, there might be more law suits such as the one described in an Ontario decision. The standard form contract used in Ontario provided that vacant possession of a London, Ontario home was to be given on closing. Closing took place at 3:09 p.m. and the purchaser's movers arrived from Toronto at 6:00 p.m. to find the vendor still moving.

And they were still moving at 9:00 p.m. when the movers left for Toronto, returning two days later to London, at an extra cost to the purchaser of $1,400. The purchaser sued for this amount, plus the cost of staying in a motel for two days, a suit that was successful because of the vendor's breach of the contract.1

***

An agent for vendors who received a 5% commission upon the sale of their home, was asked by them, before the sale completed, to recommend a builder to construct a home for them upon a lot which they owned. A builder gave a price to the agent, who added a 4% commission to it. The builder thought that the agent was the agent for the vendors, while the vendors thought that the agent was doing this gratuitously as part of the sale of their home. The agent did not disclose to the vendors that he expected to receive a commission from the builder.

The vendors paid all of the contract price, except for the amount of the commission, and the agent sued for it. The judge decided that the agent, by his actions, had created an agency relationship with the vendor, which was separate from the agency for the sale of the house. He had a duty to disclose to the vendors that he expected to receive a commission from the builder and his failure to do so resulted in a dismissal of his action .2

***

And yet another case which illustrates the benefit of attaching the Norfolk v. Aikens two paragraph addendum to the contract. The contract in question was made in 1990 before the addendum was either prepared or in common use.

The facts are typical. A conveyancer for the vendor with a registerable discharge which could not be registered until funds were received, and a purchaser's conveyancer with instructions not to register unless the mortgage was cleared from title. The purchaser's action for the return of the deposit was successful because of the vendor's inability to deliver a title free and clear of the financial encumbrance.

The addendum appears to be universally used in residential transactions, but is surprisingly omitted from some commercial contracts where it may most be needed, because of the larger mortgages to be cleared from title.3

***

Section 996 of the Municipal Act permits a subdivision of property which might not otherwise be possible, if the subdivided lot is intended to be used a separate residence for the owner, or for a limited range of relatives of the owner.

An owner entered into an agreement for the sale of the proposed lot to an individual outside the categories of the permitted relatives. She then changed her mind, and the purchasers sued for specific performance. The purchasers lost because the court was not prepared to enforce a contract that was illegal, and therefore void, because the subdivision could only be completed if the vendor falsely represented to the municipality the nature of the application for subdivision.4

  1. Foord v. Smith, 33 R.P.R. (2nd), 279.
  2. Re/Max Loyalist Realty Ltd. v. Spence, 33 R.P.R. (2AA1).
  3. Maynes v. Brown, S.C.B.C., #C903492 New Westminster, Reasons for judgement, August 24, 1993.
  4. Descoteau v. Tarrant, S.C.B.C., Duncan Registry, January, 1993.

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