April 2nd - 2015

Legal Beat: Use forms properly and fill in the blanks

A contract became null and void after forms were not completed properly and a notice waiving conditions was not delivered personally to the seller.

Legal Beat

A contract became null and void after forms were not completed properly and a notice waiving conditions was not delivered personally to the seller.

Legal Beat

by Merv Burgard, Q.C

A seller was mistaken about the terms of a conditional agreement of purchase and sale.  Completion of the transaction in Burlington would have resulted in the buyer getting the property at an unintended price that was below market value.  The motions judge and the Court of Appeal concluded that the seller could avoid completing the transaction by relying on the buyer’s failure to give notice of his waiver of conditions to the seller personally.

Stevens owned a property (Blue Water). He and his then-spouse also owned the adjacent property (Avondale), their principal residence. Stevens decided that selling the two properties together would maximize their value. For tax planning purposes, Stevens wished to allocate as much of the aggregate purchase price for the properties as possible to Avondale.

High Tower Homes Corporation (the buyer) expressed interest in the properties and submitted offers for both. The offers were not simply standard form documents. The buyer added Schedule A – consisting of two typed pages of additional provisions – to the Ontario Real Estate Association’s standard form of Agreement of Purchase and Sale. The added provisions superseded the standard terms over any conflict or discrepancy. All price increases in the course of the negotiations pertained to Avondale. Throughout, the price offered by the buyer for Blue Water remained at $1 million – an amount less than what Stevens had paid for Blue Water several years earlier in 2008. Over the course of the negotiations, the price offered for Avondale increased from $3.5 million to $4.5 million.

The buyer’s first offers for the two properties were presented together. Schedule A to each of the buyer’s initial offers included a clause called “CONDITION FOR SALE OF ADJACENT PROPERTY” to the effect that the sale of each property was conditional on the sale of the other.  A series of further offers and counter-offers ensued.  In a subsequent, fully re-typed offer for Blue Water, the buyer revised the text of the clause under the heading “CONDITION FOR SALE OF ADJACENT PROPERTY” to state that the sale of Blue Water was not conditional on the sale of Avondale. This crucial change was not “black-lined” or highlighted in any way, nor did the buyer otherwise draw this change to the seller’s attention. No change was made to the corresponding clause in the Avondale offer.

Clause 7 to Schedule A of the Agreement contained a clause – titled “CONDITION FOR BUYER’S BENEFIT” – outlining conditions for the buyer’s benefit that could be waived “by notice in writing to the seller, within the time period stated herein” (on or before February 22, 2013).  If the conditions were not so waived, the agreement would become null and void.

Clause 3 of the standard terms of the agreement, called “Notices”, provided, in relevant part: In addition to any provision contained herein and in any Schedule hereto, this offer, any counter-offer, notice of acceptance thereof or any notice to be given or received pursuant to this Agreement or any Schedule hereto (any of them, “Document”) shall be deemed given and received when delivered personally or hand delivered to the Address for Service provided in the Acknowledgment below, or where a facsimile number or email address is provided herein, when transmitted electronically to that facsimile number or email address, respectively, in which case, the signature(s) of the party (parties) shall be deemed to be original.

No Address for Service was specified in the part of the Agreement entitled “Acknowledgment” and no facsimile number or email address was specified in the spaces in the Agreement immediately following the notice clause labelled “FAX No. (For delivery of Documents to Seller)” and “Email Address (For delivery of Documents to Seller)”.

On February 22, 2013, the buyer’s lawyer gave notice to the seller’s lawyer, by fax, purporting to waive the conditions for the buyer’s benefit in clause 7 of Schedule A to the agreement and seeking an extension of time for the waiver of conditions with respect to its purchase of Avondale. According to Mr. Curic – an officer, director and principal of the buyer – the buyer’s lawyer also told him that he had to deliver the waiver to Blue Water and he allegedly did so. Mr. Curic admits that he did not deliver the notice to the seller personally and the seller’s evidence was that nothing was left at Blue Water. The notice waiving the conditions was never delivered personally to the seller.

High Tower Homes v. Stevens 2014 ONCA 911 (CanLII)

Mervin Burgard Q.C.

MERV’S COMMENTS

The Court of Appeal ruled that the contract became null and void. They discussed previous decisions, implied terms, the “entire agreement “clause, waiver, and promissory estoppel. The buyer lost out for not following the terms of the contract by using personal delivery.

The motions judge characterized the buyer’s conduct as “hard and pointed”. It was also clumsy in trying to trick the seller and then failing to complete the OREA Form notice provisions properly.

To the lawyers who oversaw this deal: If you are going to use an OREA form, use it completely, and fill in the blanks.

Mervin Burgard, Q.C.

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