Object Quickly! #445

Apr 01, 2011

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Mike Mangan

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Where time is of the essence, failure to perform an obligation on time is a fundamental breach. The innocent party may treat the breach as repudiation, walk away and sue for damages.

Gulston v. Aldred involved the sale of a residential property.1 On March 3, 2008, the parties entered a standard form Contract of Purchase and Sale where time was of the essence. The purchase price was $1,570,000 with a total deposit of $105,000. Completion was April 25. The brokerage acted as limited dual agent.

In April, the seller discovered leakage from an underground oil tank on the property. For his own reasons, the buyer also wanted more time to complete. The parties amended their contract to extend completion to August 29 and added a clause requiring the seller to remediate the property and obtain a certificate of approval from the municipality on or before May 29.

On May 29, the licensee gave the buyer a letter from the seller's contractor stating that remediation was complete and that the necessary report would be sent to the municipality. The same day, the buyer asked to extend completion to October 1, but the seller refused.

On June 10, the licensee sent the municipal certificate to the buyer, who said he was satisfied with it.

In late June, the buyer's lawyer wrote to the seller claiming that the seller breached her contractual obligation to remediate the property by May 29, but saying the buyer would complete the deal by October 31. The letter also claimed an interest in the property and threatened to file a Certificate of Pending Litigation to prevent a sale to anyone else. The seller remained ready, willing and able to complete on August 29, the agreed completion date.

In July, a contractor carried out yard work on the property for the buyer.

On August 29, the buyer did not complete. The seller promptly re-listed the property and sold it to another buyer.

When the buyer sued to recover his deposit, the seller counterclaimed for the deposit and damages in an amount to be determined later. At trial, the buyer claimed that the seller failed to deliver a municipal certificate on time by May 29, as required by the remediation clause. Since time was of the essence, the buyer argued he could walk away and recover his deposit.

The court found that, by his conduct, the buyer waived the May 29 deadline. When he received the late certificate in June, the buyer said he was satisfied with it. Roughly three weeks after the May 29 due date, the buyer claimed an interest in the property, warned the seller not to sell it to anyone else, and stated that he would complete by October 31, 2008. In July, the buyer even had work done on the property.

In doing these things, the court found that the buyer affirmed the contract. Nor could the buyer show any need for the certificate by May 29, or any loss to himself for the seller's failure to do so. The court held the seller was entitled to keep the deposit. The court also ordered the buyer to pay damages for breach of contract in an amount to be determined.

Where a licensee's client wishes to walk from a standard form contract because the other side fails to do something on time, a licensee best warns the client as follows: object quickly and clearly, get legal advice immediately, and in the meantime, refrain from doing anything that might be considered consistent with the contract.

  1. Gulston v. Aldred, 2011 BCCA 147 aff'g 2010 BCSC 241.

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