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The Agreement of Purchase and Sale (Path and Sale)

December 31, 2021

Ontario

,

Canada

Issue

What is required for a notice to extend the closing date of a real estate transaction to be valid and enforceable?

Conclusion

The agreement of purchase and sale, including any provisions setting out requirements for notice to extend the closing date, will be interpreted in accordance with general construction of contracts principles and the contra preferentum rule. (Falcone v. Primont Homes (Maple) Inc.)

In cases where there is default in performance of the contract and the innocent party is still willing to complete, notice to complete must be given in such a manner so as to be clear and unambiguous in its terms with details of the new requirements being imposed. The notice stipulating the time to complete in the circumstances then and there prevailing and in keeping with the history of the matter must not be too short and unreasonable in order to be enforceable. (Edwards-Decoito v. Maple View Building Corporation)

In Falcone v. Primont Homes (Maple) Inc., the vendor and purchaser entered into an agreement of purchase and sale for a newly constructed home that was ready for occupancy. After the agreement was signed, but before the scheduled closing date, water damage occurred to the home and the vendor attempted to fix the damage prior to the scheduled closing. When the damage was not repaired by the scheduled closing date, the vendor advised the purchaser by telephone of the damage and advised that it required a two-day extension to complete the repairs. The purchaser took the position that the vendor did not have the option to extend the closing date unilaterally, except under the Ontario New Home Warranty Program provisions, which required written notice prior to the closing date and which notice was not provided. Fragomeni J. interpreted the agreement using general construction of contracts principles and the contra preferentum rule and found that the vendor had not acted in accordance with the agreement. The purchasers were entitled to a return of their deposit and to damages.

In New Leaf Florist Co. v. Pataky, the vendor/developer entered into eight identical agreements of purchase and sale with the purchasers to build row houses. The agreements provided that "In the event that the subject dwelling are not completed by closing date, due to circumstances beyond the control of the vendor, the vendor will be allowed an extention of closing, not to exceed 60 days." Delays in construction occurred and the purchaser was advised that construction would not be completed by the scheduled closing date, but the vendor did not provide any written notice of its intention to extend the closing date. The purchasers tendered on the scheduled closing date, at which point the solicitor for the vendor wrote to advise that the vendor was not prepared to close and was exercising its right to a 60-day extention under the agreement of purchase and sale. The purchasers advised that they would not close in 60 days and the vendor sued the purchasers for damages for breach of the agreement. Anderson J. found that no express or implied term of the agreement required notice to be given to the purchaser to create the extention. The vendor was entitled to damages for breach of contract.

In Schillaci v. Stratton Woods Holdings Ltd., the purchasers agreed to purchase a new home to be built by the vendor. The agreement of purchase and sale provided a mechanism for the vendor to unilaterally extend the date specified for obtaining a building permit up to three times. The closing date was to be 120 days after the building permit was obtained. The vendor extended the date to obtain the building permit twice, providing notice in accordance with the agreement. The vendor then wrote to notify the purchaser that the building permit had been obtained, that construction had begun and set a closing date, although the vendor refered to it as a "tentative closing date." The purchaser wrote to ask if the closing date could be extended, which request was denied by the vendor. Three days before the closing date, the vendor then wrote to advise that it was again extending the date for closing. The purchaser took the position that the vendor had no right to a further extension under the agreement and abrogated the contract. McRae J. applied the contra proferentum rule when interpreting the provisions of the contract dealing with the extensions of the closing date. The vendor, who prepared the contract, had set the closing date arbitrarily, rather than 120 days after the building permit was issued, as set out in the agreement. The vendor had no general right to an extension upon providing notice that was unrelated to the vendor obtaining the building permit. The purchaser was entitled to a return of their deposit.

Law

In Falcone v. Primont Homes (Maple) Inc., 2006 CanLII 40991 (ON SC), the vendor and purchaser entered into an agreement of purchase and sale for a newly constructed home that was ready for occupancy. After the agreement was signed, but before the scheduled closing date, water damage occurred to the home and the vendor attempted to fix the damage prior to the scheduled closing. When the damage was not repaired by the scheduled closing date, the vendor advised the purchaser by telephone of the damage and advised that it required a two-day extension to complete the repairs. The purchaser took the position that the vendor did not have the option to extend the closing date unilaterally, except under the Ontario New Home Warranty Program provisions, which required written notice prior to the closing date and which notice was not provided. Fragomeni J. interpreted the agreement using general construction of contracts principles and the contra preferentum rule and found that the vendor had not acted in accordance with the agreement. The purchasers were entitled to a return of their deposit and to damages:

[116] In this case, the damage occurred on June 25, 2001 and the Vendors knew about the damage on June 25, 2001. The Vendor did not advise the Purchasers until the afternoon of the closing date that the house had sustained water damage nor did they advise the Purchasers the extent of the damage or the time it would take to fully repair the damage until the afternoon of the closing. The Vendor ought to have notified the Purchasers of the water damage immediately upon discovering it and not waited until the day and time of closing to do so. It is quite understandable that Nancy Falcone would have been extremely upset at this situation. Mr. Treloar was not notified of the problem prior to the day of closing. The Purchasers were not notified of the extent of the problem and only upon attending at the house did they discover the extent.

[117] It is unclear in the reading of section 11 whether the Vendor can unilaterally extend the closing. The ONHWP at 5(v) states that where there is a conflict or ambiguity between the Agreement and this Addendum, this Addendum prevails.

[118] I am satisfied that section 11 is applicable in these circumstances because it deals with repairs. However, section 11 does not mandate the order in which the builder must act to “repair the damage, finish the Dwelling, and complete the sale.” Clearly, here the Dwelling was complete and if the defendant seeks to rely on this section when the damage occurred after the Dwelling was complete, the defendant cannot rely on the order in which the events are listed. Therefore, the defendant could have closed the sale and repaired the Dwelling.

[119] Futher, the final sentence in section 11 is ambiguous. Although it states that extensions required for repairs shall be in addition to those required under ONHWP schedule, it goes on to state “the Vendor may not further extend under the Ontario New Home Warranty Schedule for such repairs only, unless the Purchaser consents in writing.” This is a case where the defendant seeks to rely on an extension “for such repairs only.” The Purchaser did not consent in writing.

[120] In addition, by reference to the Ontario New Home Warranty Schedule it appears that the agreement intends to incorporate into section 11 the other provisions governing extension from that Schedule. Therefore, notice would be required “as soon as reasonably possible and in any event prior to the closing date…” If section 11 is not meant to incorporate such terms, the lack of any reference to form of notice, restrictions etc, would make it vague in the extreme and it is doubtful that in such an important contract as the purchase of a home this would have been acceptable. The Vendor did not advise the Purchasers of the water damage upon discovering same and according to Mr. Montesano may not have ever advised the Purchasers if the repairs had been completed on time. The Vendors did not request an extension until the very last minute, essentially at the time of closing, and did so without any prior written notice. I cannot accept that section 11 contemplates this course of conduct on the part of the Vendors.

[121] The issues relating to section 11 outlined above must resolved in favour of the Purchasers in accordance with general construction of contracts principles and the contra preferentum rule.

[122] Further, section 5(v) states that where there is a conflict or ambiguity between the Agreement and this Addendum this addendum shall prevail.

[123] In Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888 the Court stated at page 12:

Even apart from the doctrine of contra proferentem as it may be applied in the construction of contracts, the normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. Similarly, an interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result. It is trite to observe that an interpretation of an ambiguous contractual provision which would render the endeavour on the part of the insured to obtain insurance protection nugatory, should be avoided. Said another way, the courts should be loath to support a construction which would either enable the insurer to pocket the premium without risk or the insured to achieve a recovery which could neither be sensibly sought nor anticipated at the time of the contract.

[124] In reading the Agreement of Purchase and Sale along with the Addendum, I cannot conclude that the vendor acted in such a manner that it was in compliance with the intentions of the parties or in compliance with the Agreement as a whole.

In Edwards-Decoito v. Maple View Building Corporation, 2005 CanLII 47699 (ON SC), the purchaser entered into an agreement of purchase and sale with the vendor/developer. The agreement provided for the vendor to extend the closing date by up to 240 days for reasons related to construction delays. Construction delays occurred and the vendor provided written notice of its decision to extend the closing date by 240 days. The purchaser was then advised by the vendor over the telephone that the vendor required a further extension and the purchaser was verbally given a new closing date of December 22. The purchaser's solicitor's office was going to be closed for the holidays from December 23 to January 5. The purchaser's financing fell through at the last minute and the vendor agreed to a 1-day extension so the purchaser could obtain new financing. New financing was obtained but the purchaser's solicitor was not available to close until January 5 and the purchaser's solicitor failed to obtain an extension from the vendor. The vendor took the plaintiff's failure to close on December 23 as a repudiation of the contract and retained the purchaser's deposit. Jenkins J. found that the closing date had been properly extended to December 22 by the agreement of the parties, even though there was nothing in writing to that effect:

[23] In the case of Matthews v. McVeigh, 1954 CanLII 118 (ON CA), [1954] O.R. 278 (Ont. C.A.), the Ontario Court of Appeal held that although time was declared to be the essence of the Agreement, those provisions as to instalment payments were never actually carried out or insisted upon between the parties. Aylesworth J. at p.6 stated:

“In these circumstances I think it is quite clear that the stipulation in the agreement providing that time was to be of the essence was completely disregarded by both the appellants and the respondent and ceased to be of any effect upon the rights of the parties. I think the respondent had no right to treat the contract as terminated without first giving the appellants a reasonable time within which to make good their default, upon notice to them that time was again to be considered of the essence of the agreement and that unless the default were cured within such reasonable time she would consider the agreement at an end and herself free to deal with the property as she might be advised: see Hutts v. Hancock, 1954 CanLII 111 (ON CA), [1954] O.R. 105, [1954] 1 D.L.R. 790, and the authorities therein collected.”

[24] In the case of Beacon Industrial Development Corp. v. G.C. Farm Supply Ltd. (1981), 123 D.L.R. (3d) (Alta. Q.B.), Crossley J. held at p.3:

“… merely making a new day for performance is not sufficient to make time again of the essence, even if that new day is a reasonable time in advance. The notice must in some way bring home to the defaulting party that time is again of the essence or being made of the essence. It is not, as I apprehended the situation, necessary to use express words stipulating time to be of the essence. It is sufficient, in my opinion, to bring home to the defaulting party that if the new day is not met the party serving the notice will treat the contract at an end.”

[25] In the case of Manotick Pool and Spa v. McKee, [1996] O.J. No. 5442 (Ont. SM.Cl. Ct.), Gilbert Deputy J. at p.6 stated:

“The issue to be decided here is whether one party can unilaterally change the contract so as to make time of performance of the essence and thereafter if not performed as stipulated be entitled to rescind it.

In cases where there is default in performance of the contract and the innocent party is still willing to complete, notice to complete must be given in such a manner so as to be clear and unambiguous in its terms with details of the new requirements being imposed. The notice stipulating the time to complete in the circumstances then and there prevailing and in keeping with the history of the matter must not be too short and unreasonable in order to be enforceable. Rados v. Paconla Investments Ltd. (1981) 20 R.P.R. 154 (B.C.S.C.); Dobson v. Dobson (1993) 29 R.P.R. (2d) 228 (Ont. Ct. Gen. Div.); Beacon Industrial Development v. G.C. Farm Supply (1981) 1981 CanLII 1154 (AB QB), 123 D.L.R. (3d) 467 (Alta. Q.B.).”

[26] In the case of Woodshire Estates Inc. v. Gregory, [1993] O.J. No. 4235, Paisley J. found that there was no evidence to suggest the purchaser of a home agreed to an extension. He further found that the purchaser ought to have known that the closing date was wrong in the letter and that they were content to let the time period expire because they were having trouble selling their home. He therefore ruled that no punitive or exemplary damages were allowed.

[27] In the case of Morris et al v. Cam-Nest Development Ltd., 1988 CanLII 4604 (ON SC), [1988] O.J. No. 720, 64 O.R. (2d) 475, MacFarland J. held that:

“Although neither party did anything on the original closing dates and neither was then ready to close, and although time was of the essence, the contract remained in force and either party could establish a new closing date, as the vendor did. In any event, both parties treated the rescheduled dates as the new closing dates, since the plaintiff’s tendered on those dates.”

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[29] I find that Decoito acted reasonably and properly in her efforts to complete this transaction. Her problems started with her real estate agent who according to her attempted to obtain extra money from her for which he was not entitled. She employed a mortgage broker namely Shamira Lalani who found mortgagees who withdrew from their financing commitment virtually at the last minute, December 22 and 23, 2003. Her lawyer Mukesh Bhardwaj and his law clerk Geetha Narayan failed to protect her properly in obtaining a closing date extension beyond December 23, 2004. She was not adequately and properly informed by her lawyer as to what was transpiring with respect to the closing.

[30] Mr. Pollack, in his letter of December 23, 2003, left the door open to the purchaser by stating in the first paragraph of his letter to fax a copy of the client’s mortgage commitment. According to the evidence on December 23, 2003, later in the day, Mr. Singh was able to obtain a mortgage commitment from Bridgewater Finance. There was no evidence that this was communicated to Mr. Pollack.

[31] The significant issues are:

(i) Was the vendor being reasonable in not extending the closing date until January 5, 2004;

(ii) Was December 22, 2003 a proper date for closing since it had not been confirmed by the parties in writing; and

(iii) Given the overall dealings between the parties should Decoito be relieved from forfeiture of her deposit based on the authorities.

[32] I have no hesitation in finding that the parties by their conduct, agreed to the extension of the closing date to December 22, 2003. I further find that the closing date was extended to December 23, 2003. Decoito has established to my satisfaction that she was in a position to close this transaction on January 5, 2004, which is conceded by the defendant. I find that Maple View treated Decoito reasonably and fairly up to and including December 22, 2003. They advanced the construction date of her house to accommodate her including advancing the closing date to December 22, 2003 so that she could move before December 31, 2003.

[33] I find that had her lawyer Bhardwaj requested a closing date of January 5, 2004, it would have been probably granted. I find however, that although Maple View consented to the adjournment of one day to December 23, 2003, they ought to have agreed to an extension to January 5, 2004. Lloyd Pollack in his letter of December 23, 2003, did not close the door on a further extension by requesting a fax of a copy of Decoito’s “mortgage commitment together with whatever information you have from your clients mortgagee advising that funds are not available until January 5, 2004”.

In New Leaf Florist Co. v. Pataky, 1984 CarswellOnt 3399 (Westlaw), the vendor/developer entered into eight identical agreements of purchase and sale with the purchasers to build row houses. The agreements provided that "In the event that the subject dwelling are not completed by closing date, due to circumstances beyond the control of the vendor, the vendor will be allowed an extention of closing, not to exceed 60 days." Delays in construction occurred and the purchaser was advised that construction would not be completed by the scheduled closing date, but the vendor did not provide any written notice of its intention to extend the closing date. The purchasers tendered on the scheduled closing date, at which point the solicitor for the vendor wrote to advise that the vendor was not prepared to close and was exercising its right to a 60-day extention under the agreement of purchase and sale. The purchasers advised that they would not close in 60 days and the vendor sued the purchasers for damages for breach of the agreement. Anderson J. found that no notice was required pursuant to the agreement and that the vendor was entitled to damages:

12 I turn now to the first of the matters to which I alluded in opening; that is the construction of the clause insofar as it pertains to the closing date. With the knowledge that it is repetitious, I read again one portion of Schedule A:

"In the event that the subject dwelling are not completed by closing date due to circumstances beyond control of the vendor, the vendor will be allowed an extention of closing not to exceed 60 days."

Since words are to be construed in their ordinary and natural meaning, it is useful first to have reference to the dictionary definition of the word "allow". In the Shorter oxford Dictionary Third Edition, published in 1973 at page 50 of volume 1, are a number of definitions of the term. of those which appear, most apt for the context in which the word now follows to be construed, are the following:

"to concede, permit, to assign as a right or due, to give or let"

Much to the same effect are the definitions contained in Webster's New World Dictionary, Second Collegiate Edition, 1978, where again I have selected from the definitions which there appear, the following:

"to let do, happen, permit, let, to admit, to provide or allot."

As I construe the words of the contract which I have just read, no act on the part of the vendor is required to call that clause into effect.Mr. Ungerman did not need to do what he did in writing his letter of September 1st. In my view, his having written the letter, neither adds to nor detracts from the considerations upon which this case must be decided. In my view, if the facts were such as to bring the extention clause into operation, the extention followed automatically. It might almost be said, although I need not go so far, that upon that fact occurring,the fact which triggers the clause, time became at -large, subject only to the limitation of sixty days referred to in the clause.

13 Counsel for the defendants submitted that to invoke the clause, it would be incumbent upon the plaintiff to give notice in writing indicating an intention to do so and specifying the circumstances which entitled the vendor to do so. He submitted that such a notice was necessary in order that the purchasers might know what their position in respect of the transactions was.

14 There is, in my view, a fundamental and perhaps fatal objection to that submission and that is that the clause does not say so. It would have to be implied and the circumstances which give rise to an implied term, are conspicuously lacking. The clause can have complete efficacy without the requirement of notice. With the facts other than they are, I might feel it incumbent upon me to deal with that argument in more detail. Since I do not intend to do so, it is perhaps appropriate that I should now express some findings of fact as bearing on this aspect of the case.

15 I conclude and find as a fact, that up until the end of July Pataky was fully appraised of the situation, and that any want of knowledge after that time and prior to September 1, 1981, was a matter of choice on his part. I further conclude and find as a fact that knowledge of Pataky in this respect is to be imputed to the other defendants. It was Pataky who entered into the agreements on behalf of the other defendants. Save for Downham, all the other defendants, qua purchasers, were represented by the same solicitor. At trial all defendants were represented by the same counsel. The defendants, throughout the initial stages at any rate, appeared to deal with the transaction through Pataky.

16 I also conclude, and find as a fact, that everyone involved in the transaction knew well in advance of September 1, 1981 that the buildings would not be completed on that date, and that the transactions could not close on that date. In my view the purported tender on September 1st had no purpose, other than to advance a claim of the defendants to be entitled to repudiate. I do not intend to enumerate the several respects in which the ordinary incidents surrounding the closing of a real estate transaction were ignored, or omitted. I do not say this by way of criticism in any way of the solicitors acting for the defendants. I merely make it as an observation of fact.

17 I have already indicated that no term providing for notice needs to be implied in order to give efficacy to the clause. In certain situations the giving of such notice, voluntarily and as a matter of precaution, might have been a prudent thing for the vendor to have done. It was not something that was required to be done by the terms of the contract, and on the facts of this case, the doing of it would have been superfluous and to no purpose.

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36 I therefore conclude, and find as a fact, that completion was delayed beyond September 1, 1981, due to circumstances beyond the control of the vendor, to use the words of the contract; or beyond reasonable human foresight and skill, to use the words of the Chief Justice of Canada in Atlantic Paper. I conclude, as a matter of interpretation of the contract, that by reason of that fact, the vendor was allowed an extention, not to exceed 60 days; that no notice was required to create the extention, which on the facts came into existance pursuant to the terms of the contract. I further conclude and find as a fact, that the defendants, by their words and actions on, and immediately after, September 1, 1981, wrongfully repudiated their contractural obligations to the -plaintiff. I also conclude and find, that such repudiation entitled the plaintiff to sue as it did, for damages for breach of the contract and that it is entitled to judgment for such damages.

In Schillaci v. Stratton Woods Holdings Ltd., 1992 CarswellOnt 586 (Westlaw), the parties contracted for the purchasers to purchase a new home to be built by the vendor. The agreement of purchase and sale provided a mechanism for the vendor to unilaterally extend the date specified for obtaining a building permit and that the closing date was to be 120 days after the building permit was obtained. The vendor extended the date to obtain the building permit twice, providing notice in accordance with the agreement. The vendor then wrote to notify the purchaser that the building permit had been obtained, that construction had begun and set a closing date. The purchaser wrote to ask if the closing date could be extended, which request was denied by the vendor. Three days before the closing date, the vendor then wrote to advise that it was again extending the date for closing. The purchaser took the position that the vendor had no right to a further extension under the agreement and abrogated the contract. McRae J. agreed with the purchaser and found they were entitled to a return of their deposit:

13 The issue in this case is whether or not there has been a breach of the contract with respect to the closing date by the defendant builder. Schedule "B" to the agreement provides that the closing date "shall be established 120 days after obtaining building permits from the Town of Markham." It also provides that if the plan of subdivision is not registered on or before June 30, 1981, and is conditional upon building permits becoming available on or before June 30, 1981, the defendant builder may, in its sole discretion, extend the time allotted for such registration and the availability of building permits for three successive separate periods of one month each. The defendant did purport to twice extend the time; first, by letter of June 23, 1981, to July 31, 1981; and, by letter of July 27, 1981, to extend further to August 31, 1981. No further notice of requirement to extend was provided to the plaintiffs, but on August 26, the defendant advised the plaintiffs that the conditions had been met and set a "tentative" closing date of November 20, 1981, but purported to hold back the right pursuant to para. No. 6 of the agreement to further extend the time.

14 Notwithstanding the defendant's letter of August 26, it now becomes apparent that all of the requirements of the municipality which would permit the issuance of a building permit were not complied with until late September 1981, and in fact the building permit was only issued on September 28, 1981.

15 The defendants argue that the words "becoming available" in Schedule "B" has a special meaning to builders. It means, according to the defendant, that time when the subdivider has complied with all of the requirements necessary for it to perform so that it is then available to a builder subject only to the builder complying with requirements within its responsibility. In this case, the defendant says building permits became available when the plan of subdivision was registered, August 14, 1991, and therefore the closing date should have been 120 days later or any time before that, as decided by the defendant builder. For that reason, November 20 was selected as the closing date. When the building was not completed sufficiently for the closing to take place November 20, the defendant argues that pursuant to para. No. 6 of the agreement, the builder has the right to extend the closing date, "as may be required by the Vendor."

16 I am afraid I do not agree. The builder prepared the agreement and is bound by its terms and conditions, particularly in a case such as this where the plaintiffs were not permitted to negotiate; it was put to them on a take it or leave it basis, and more particularly where the contract is so one-sided in favour of the defendant. If it was the intention of the defendant builder to purport to the words "becoming available" a special meaning as used in the building trade, that special meaning must necessarily be communicated to the plaintiffs before such an agreement can be enforced. The contra preferentem rule clearly applies in such a situation. Likewise, the defendant's contention that the closing date could be any time within 120 days from the date the permit becomes available is contrary to the strict reading of the defendant's own contract.

17 The date set by the defendant for closing, November 20, 1981, was not 120 days after the subdivision was registered, nor was it 120 days after the building permit finally became available, that is, after September 28, 1981. In purchasing a home, buyers are usually involved in the most important financial transaction of their lives. The requirements of arranging financing, arranging the sale of an existing home, and moving, are of major importance to purchasers. Closing dates are fundamental conditions in contracts for the sale of real property.

18 The defendant was in breach of the agreement of purchase and sale as follows:

It failed to extend a third time, by notice to the plaintiffs, the date at which the permit would be "becoming available."

It arbitrarily set the closing date at November 20, 1981, which was not 120 days after the permit became available by any com putation. It was not entitled to arbitrarily set a date less than 120 days from the permit becoming available. The fact that it did, and then refused to extend that date at the plaintiffs' request, then three days before this closing date purported to extend the closing to some undecided future date in 1992, only highlights the inequitable conduct of the defendant.

19 The plaintiffs were entitled to abrogate the agreement on December 2, 1981, and they are entitled to the return of their deposit and the sum of $1,485 paid by them on July 9, 1981, for extras. The counterclaim is dismissed. The plaintiffs are also entitled to costs and prejudgment interest at 11 per cent from December 24, 1981.

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