Aug 01, 1987

Standard Form Contract of Purchase and Sale - Interpretations #108


By Gerry Neely

"Subject to a first mortgage being made available to the Purchaser by July 31, 1987, etc. . . ". Is the word "by" the equivalent of "prior to" or "not later than"? This is one of several questions asked by licensees attending seminars to discuss the new standard form contract of purchase and sale.

The licensee giving the seminars has had conflicting "off the cuff" legal opinions given to her and she has asked if there are any B.C. decisions interpreting the word "by" in this context. While I have been unable to find a reference to a B.C. decision interpreting an offer to purchase, a decision in a landlord tenant dispute provides some assistance. In 1940 the British Columbia Court of Appeal had to decide whether a Notice to Quit which was given in June to a tenant to vacate premises "by July 31, 1939", was valid. In a split decision, the Court held that this meant that the tenant had all day to vacate the premises and therefore the notice was valid. (It also meant that the tenant had no right to remain after the 31st of July, which meant a swift midnight move.)1

A decision more to the point but made in Ontario, was given in 1922 in connection with an offer to purchase that was to be accepted "by the 10th December, 1920". The Judge decided that "by" gave the purchaser the whole of the 10th of December within which to accept the offer.

Therefore, while "by'' has been interpreted to mean "not later than", anyone wishing to remove any ambiguity can provide that the condition is to be fulfilled "on or before July 31st, 1987".2

The next question concerns that part of the new standard form of offer which states that a contract containing a condition is terminated unless written notice has been given that a condition for the benefit of one party has either been waived or declared fulfilled. Some licensees take this to mean that the party to the contract entitled to the benefit of a condition, can simply walk away from the contract and have his deposit returned by doing nothing to fulfill the condition.

It would be a mistake to give this advice. British Columbia Courts have held that there is an implied obligation on the part of a party to use its best efforts to fulfill the conditions set out in an agreement. A party failing to do so, cannot rely on his own failure as an excuse for the non-fulfillment of this obligation. This was discussed in Column 9, and in a recent Ontario case where a builder refused to complete the sale of a lot which the builder in turn was purchasing from a developer. The builder's sale was subject to the developer obtaining approval and registration of the subdivision plan, which the developer covenanted to do. The agreement between the builder and the purchaser provided that while the contract would be void if thc plan was not registered by a certain date, the builder could extend the time for completion for three successive months. The builder refused to complete because the Municipality's requirement for a sidewalk reduced the size of the lot by 13% and the builder refused to agree to the purchaser's request for a reduction in the purchase price of the lot. The evidence made it clear that if the builder had spoken to the developer, the builder would have learned that the plan would have been approved within the period covered by the monthly extensions which the builder had the power to grant.

In an action brought by the purchaser for specific performance and for a reduction in the purchase price, the builder argued that the agreement was void because the condition as to subdivision had not been fulfilled within the time provided in the agreement. The Court said that the builder could not rely on this because the builder had contributed to the non-fulfillment of the condition.3

 1.J.H. Munro Ltd v Vancouver Properties Ltd., 1940 3WWR 26.
 2.Richardson v. Abel 1922, 23 Ontario Weekly Notes 136.
 3.Fenton v Barbrook, 34 DLR (4th) 683.

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