December 5th - 2012

Legal Beat: Failure to communicate leads to botched deal

This Ontario deal was supposed to close on July 27, but the transaction failed to close. The seller resold the property and sued the buyer for losses of $28,000.

This Ontario deal was supposed to close on July 27, but the transaction failed to close. The seller resold the property and sued the buyer for losses of $28,000.

The seller was living in Atlanta, Georgia, where he was completing a residency in oral surgery. His lawyer had forwarded the necessary papers for signing by courier and hoped to have them available for the closing. However, the seller’s lawyer was not available on the closing date. His very experienced real estate secretary was left to handle the paperwork. She received faxed documents from the seller on the closing date and told the buyer’s lawyer that the original documents were in transit. One necessary document was an affidavit dealing with Canadian residency under the Income Tax Act.

The original documents did not arrive at the buyer’s end in time for the closing. The buyer’s lawyer agreed that the documents could be there within two business days. He also suggested that the closing be extended and that the seller pay a per diem payment for the buyer’s expenses as well as a holdback of $1,000 for damages. Neither the seller nor his lawyer could be reached. The secretary suggested an extension with no terms. The buyer refused and treated the contract as terminated.

An innocent party may take advantage of a “time is of the essence” provision to terminate a contract. The buyer was entitled to the return of his deposit and the seller’s claim for damages was dismissed.

Wallace v Nother 2010 ONSC 4157

MERV'S COMMENTS
The buyer was ready, desirous, prompt and eager to close the transaction. On the other hand, the seller was not -- or at least he did not communicate his willingness to close. The judgment does not indicate where the seller was on the closing date or why his lawyer was unavailable. The judge, quoting from the Paul Newman movie, Cool Hand Luke, noted, “What we have here is a failure to communicate.”

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