January 6th - 2004

Merv's column

"Fore" whose benefit?

"Fore" whose benefit?
The buyers intended to develop a golf course on the lands they purchased and the agreements also contemplated the severance of the lands with the sellers retaining the portions of their lands containing their residences and several estate lots.

There were conditions in the agreements relating to the buyers obtaining agreements with the sellers, a draft approval for the development of the golf course and land division (severance) approvals for the estate lots to be retained by the sellers. All of the conditions were fulfilled except for the severance approvals for the lots. The buyers did not apply for the required severances and then purported to waive all the conditions according to the clause which stated: "The conditions herein are for the benefit of the Purchaser and may be waived by it in its sole discretion prior to the end of the Conditional Periods." (Note: there is no indication in the decision as to who drafted the clause.)

The sellers refused to close. The buyers sued the sellers for specific performance of several Agreements of Purchase and Sale. The courts refused that request by the buyers and declared that their deposits were forfeited.

The judge agreed with the sellers that the severance approvals were a fundamental condition of the agreements and that the waiver clause made no commercial sense as the severances could only benefit the sellers and the condition did not represent the true intention of the parties. The agreements were "patently ambiguous." Since the buyers did not proceed properly to obtain the approvals at their expense, they could not enforce the agreements. The Court of Appeal agreed that the buyers failed to keep their bargain and under the circumstances they lost their deposits.

Harrison Estates v 1205458 Ontario Ltd. 2003 ONCA 10312

Merv's comments
The judge noted that the salesperson involved was - in practical terms the real estate agent for both vendors and purchasers. This is another example of some careless drafting of clauses. Are the buyers and sellers happy with whoever drafted that clause? And, how much commission did the agent get?

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