Reference: The “72” Hour Clause #141
CATEGORY: Legally Speaking
TAGS: Conditional Clause Contract of Purchase and Sale Damages
By Gerry Neely
The time clause, which may be whatever number of hours the parties agree upon, is a useful tool for negotiating conditional offers but it can create problems when notice of an acceptable offer made by a second purchaser cannot be delivered promptly to the first purchaser. The first reported case of which I am aware which deals with the competing interests of the first and second prospective purchasers, occurred in Ontario where an agent negotiated an agreement of purchase and sale on behalf of a vendor, with purchasers named Rock (purchaser one).
This agreement was conditional upon the sale of the purchaser ones' property. The agreement contained a 72-hour clause which required purchaser one to waive the condition or meet the terms of a subsequent offer, within 72 hours of the delivery to them of the notice of the subsequent offer.
So far, so good, and nothing unusual. A subsequent agreement of purchase and sale was made with purchaser two on November 20, 1987. It was conditional upon the first agreement "failing to become a firm and binding offer by 11:59 p.m. on November 24, 1987, at which time this offer shall become a firm and binding offer." The agent was unable to reach purchaser one until 11:15 a.m. on November 22, and at that time, delivered a notice which gave them until 11:59 a.m. on November 25 to waive the condition in the agreement or meet the offer. The agent then called purchaser two to advise him of the extension of the 72-hour period until November 25, 1987, because of the delay in the delivery of the notice. Purchaser two did not dispute this extension of the date for waiver of the condition.
On the morning of November 24, the agent was advised by telephone by purchaser one that he and his wife had waived the condition. The agent prepared a waiver agreement dated November 24, which was not signed, however, until the next day because purchaser one was unavailable on the 24th.
Purchaser two met with his lawyer on November 25 before he was made aware that the first agreement was now unconditional. During that initial meeting, he did not raise the question of the extension. Later in the day, when the agent returned to purchaser two his offer and deposit cheque, his lawyer took the position that purchaser two's offer was enforceable because the condition had not been waived by midnight on the 24th. He then filed a lis pendens which prevented the transfer of title to purchaser one.
Purchaser one argued that their oral waiver of the condition created a binding contract on the 24th, which was merely confirmed by the written document executed on the 25th. The judge accepted this argument that the oral agreement was sufficient to create a binding contract because the agent, by preparing the waiver agreement, had relied and acted upon the oral waiver. The parties' conduct indicated an intention to effect their legal relationship by creating a contract enforceable by either of them.
While this decision effectively disposed of purchaser two's agreement, the judge went on to say that by his failure to object when he was advised of the extension, purchaser two had lulled the agent into believing that purchaser two had agreed to the extension. Had purchaser two objected, the agent stated that he would have attempted either to have purchaser two sign an amendment to permit the extension, or to persuade purchaser one to waive the condition on the 24th. Fortunately for the agent, purchaser one did this without prompting, but had they not done so until the 25th, the agent would have acted to his detriment by relying upon purchaser two's tacit acceptance of the extension. For this reason, purchaser two could not now say that purchaser one had only until the 24th to remove the condition.
Purchaser one obtained specific performance of their agreement, plus damages against purchaser two for expenses incurred by them because of his filing of the lis pendens.
Damages were claimed against purchaser two by the vendor for the loss of interest on the amount of the sale price from the date when the sale to purchaser one should have been completed. The vendor was a limited company in which the agent was a major shareholder. The company's claim for damages was denied because the agent "was sloppy in the wording of the agreement with purchaser two and as such created some of the confusion which existed on November 25, 1987."
The case is useful as support for the binding effect of an oral waiver. However it brings home the problem of an oral or assumed waiver and the desirability of written acceptances, amendments, or waivers, signed by the parties.
|Rock et al. v. Foster et al., 1 R.P.R. (2d) p. 55.
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