Timing (For Closing, For Payment of a Deposit, or Acceptance of a Counter Offer) #202
By Gerry Neely
The Ontario practise of closing transactions differs from the practise in British Columbia, but the comments made by a judge in a case where a vendor was seen to be trying to get out of a transaction may compel both vendors and purchasers to refrain from acting in an "arbitrary, capricious or unreasonable manner."
The closing of the purchase of a new home was to take place at the vendor's solicitors' offices at 11:00a.m. The purchasers were entitled to an inspection of the house, but because of deficiencies which the builder had to correct, the inspection was not completed until 3:00 p.m., delaying the closing. The purchasers' funds were in hand and they were ready, willing and able to close, but tender could not be made until the next day. The tender was refused and the vendor advised the purchasers that for another $20,000 they could have the house.
The judge concluded that the vendor had deliberately orchestrated a situation which prevented the purchasers from being able to close on time. He held that both vendors and purchasers owe a duty to each other to honestly perform a contract honestly entered into between them. The vendor's argument that time was of the essence and therefore the purchasers were in breach of the contract fell on deaf ears, because of the judge's finding of bad faith on the part of the vendor.1
In another Ontario case, a purchaser refused to agree to an extension of a few hours of the time to close, to enable a vendor to correct a defect the vendor was easily able to do. The vendor was able to tender documents before midnight, but after the registry office had closed. The purchaser refused to complete and lost his deposit on the basis that he had failed to act in good faith and to take all reasonable steps to complete the contract.2
An accepted offer to purchase contained a clause requiring the purchaser to pay a $5,000 deposit within 24 hours of acceptance. The contract of purchase showed without amendment that the acceptance was on September 24th. The deposit was paid September 26th. The vendor refused to close and the purchaser sued for specific performance. The purchaser lost because of his failure to pay the deposit within the 24 hour period.
The purchaser tried to argue that as a result of oral discussions with the vendor, the vendor had extended the time for payment of the deposit. There was no ambiguity in the contract and the judge refused to admit oral evidence to contradict the clear written statement that acceptance was September 24th. (Another reason for always getting it in writing.)3
A vendor's counter offer required acceptance by the purchaser by 8:00 p.m. on Friday. On Saturday, the purchaser countered the counter offer by accepting all changes except one which increased the deposit to $60,000. The vendor agreed to reduce this to $30,000 provided the deposit was paid to the vendor. All counter offers were made by the agent on the contract of purchase. No deadline was set in the purchaser's counter offer for a vendor's acceptance. The purchaser's counter offer was delivered to the vendor on Saturday together with the deposit cheque. The vendor did not initial the deposit change on the contract, but did accept delivery of the cheque. The bank refused to negotiate the cheque because of a slight error in the name of the payee. It was returned to the purchaser for correction and was delivered to the vendor on Monday.
By then the vendor had faxed a notice of repudiation because of the delay of delivery of the cheque. His argument was that no contract could arise because of the purchaser's failure to accept the terms of the vendor's counter offer on Friday. Quite clearly, the passage of that deadline entitled the vendor to do nothing further. The counter offer revived the contract only if the vendor accepted it. Although the vendor had not initialled the change, the judge held that his conduct in taking the cheque and then asking that it be corrected was evidence of the vendor's acceptance of the purchaser's counter offer.
Damages of $109,000 awarded to the purchaser were based upon the price he had offered to the vendor and the price the vendor obtained upon the sale of the lots.4
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