March 12th - 2009

LEGALBEAT: “Shall not survive and merge” clause survives

The buyer and seller were represented by the same brokerage. T, an owner of the brokerage, was a dual agent.

The buyer and seller were represented by the same brokerage. T, an owner of the brokerage, was a dual agent.


The first claim by the buyer related to the condition of a hot-tub incorporated as a collateral term or condition within the Agreement of Purchase and Sale. The offer stated that, "The seller declares the hot-tub is in good mechanical working order." In fact, after closing, the buyer at his earliest opportunity determined that the hot-tub was not operable, which was known to the seller. Although the buyer was suspicious that the hot-tub was not operational at the time of inspection, there was no opportunity to check such deficiency until after closing, when the hot-tub could be filled to determine its mechanical condition. This opportunity to make such a determination must take place within a reasonable period of time after closing.


The second claim related to the misrepresentation of the home's windows on the property to be sold. These were represented as "newer windows" in the listing agreement. This representation was not incorporated into the Agreement of Purchase and Sale. The judge said "that any reference to 'newer windows' is incapable of any specific time-definition." Even if he accepted that such representation was made, any defect in the windows was subject to inspection prior to closing. As with any patent defect, it was readily observable and the subject of inspection and therefore the principle of caveat emptor applied.


In dealing with the hot tub, he made a finding that it was a warranty which did not merge on closing. This constituted a breach by the seller of the terms relating to the hot-tub; he assessed damages against the seller to the extent of 50% and 50% against the agent and brokerage. Although it would have been prudent to make clear that this proviso survived transfer of title, when the court examined paragraph 25 of the printed Agreement together with the intent of the buyer and the knowledge of the seller of the importance of this provision, it survived the transfer of title.

Gardiner v. Mulder, 2007 CanLII 6927

MERV'S COMMENTS
It is surprising how often I am asked on Legal Forum about the "shall survive and not merge" clause. This case is another example of trying to determine the intentions of the parties. It is easier if you just say that it will survive - or will not. The finding of the obligation of the agent was for his failure to make it absolutely clear to the seller of his legal responsibilities regarding the hot-tub clause and the buyer's possible right to claim damages.

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