February 1st - 2011

LEGAL BEAT by Mervin Burgard: Deal not dead if parties agree to another document

The buyer signed an Agreement of Purchase and Sale (APS) for a pre-sale unconstructed condominium unit that she wished to own. The document contained a condition that stated:

The buyer signed an Agreement of Purchase and Sale (APS) for a pre-sale unconstructed condominium unit that she wished to own. The document contained a condition that stated:

"The agreement shall be subject to the purchaser arranging financing satisfactory to the purchaser on or before May 8, 2006. In the event the purchaser does not remove this condition in writing within the period of time provided above, the initial deposit (less any amounts to be deducted pursuant to Section 1) will be returned to the purchaser, and this agreement will be of no further force and effect."

The buyer made the initial deposit to the seller. On May 10, she removed the financing condition and provided him with a second deposit. An addendum to the APS was created, and the seller then took the property off the market.

Subsequently, the buyer conducted herself as though she had entered into a binding contract for the purchase of the condo. She received and acknowledged an Amendment to a Disclosure statement. She visited the condominium company’s presentation centre to choose colours and finishes that met her taste for décor in the unit.

Two years later, the buyer wrote to the seller to advise him that her circumstances had changed. She had lost equity in her current property, had reached retirement age and indicated that she did not wish to complete this real estate transaction.

She took the position that she had either not met the financing condition prior to the May 8 deadline or that she had not waived it. Her view was that the contract was therefore dead. She argued that her actions afterward did not amount to a new contract.

On the other hand, the seller argued that there was an enforceable contract based on the May 10 addendum to the APS, which stated:

"The purchaser hereby removes the financing condition set out above, and the parties confirm that the agreement is in full force and effect."

The judge decided that even if the APS became null and void on May 8, the parties subsequently entered into another enforceable contract on May 10.

Stark v Humboldt 2009 BCSC 1006

MERV’S COMMENTS
Cardio-pulmonary resuscitation will not work two days later on a dead body, but an addendum may well save a “dead” deal over the same period. The deal can be revived if a subsequent document says so, and if everyone agrees and then behaves as if the deal is still alive.

The parties may be "estopped" from denying the existence of their contract, or the courts may find that a new contract was created. In this case, the judge found that the buyer and seller had struck a new deal two days later and ruled against the buyer.

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