A few of your questions have been answered!

(5 minute read)

What happens if a deposit is not paid in the time described in the agreement?

There is uncertainty as to what happens to a deal if the purchaser does not come up with the deposit called for in the agreement in the time prescribed – usually 24 hours from acceptance.   Does that give rise to damages or is the Vendor entitled to treat the agreement as over and relist the property?  Until recently, lawyers were uncertain and could not give straightforward advice on this subject.  As of 2005, this question has been answered. 

In 1473587 Ontario Inc. v. Jackson, Mr. Justice Rutherford  set out the law on this matter.   He found that time is of the essence in these agreements and the failure to deliver a deposit in time breaches the contract allowing a Vendor to treat an agreement of purchase and sale at an end.  Now, if a deposit is not paid in the time allotted, a Vendor is free to relist the property and sell to someone else.

Despite the above, it goes without saying that you should always seek legal advice on this and every matter concerning the end of a contract without a mutual release.

The Bottom Line: Deposits not paid in time likely make agreements null and void!

Can I get out of an agreement that is conditional for any reason?

It is often the case that a client gets “cold feet” after they have signed an agreement and seeks to back out of an agreement for reasons that have nothing to do with the stated condition.   Can they?  The answer is probably not.    

In 2014, the Supreme Court of Canada issued a ground-breaking decision that made Good Faith a fundamental part of any contractual dealing.   Bhasin v. Hrynew established that parties must make an effort to conduct themselves in good faith in all contractual dealings.   Practically, from a Real Estate perspective, Bhasin can be understood to mean that both purchasers and sellers must have bona fide reasons based on real grounds for cancelling a deal per the conditions set out in Schedule “A”.  As an example, where a buyer is seeking to get out of an agreement via a home inspection clause and said inspection was not, in fact, performed, it could be argued that the Buyer was not acting in good faith and the agreement would therefore still be held by a court to be good and valid.

The Lesson?  Make sure that you and your client act in good faith as you complete your deals.   If you cancel your deal due to a condition, be sure that the reason being provided for as the reason for the cancellation is true and made in the spirit of abiding by the terms of the contract.   If you don’t, a Court may find that the deal is not cancelled at all. 

The Bottom Line: Act in Good Faith in all Contractual Dealings


Written by: Mark Morris, B.A., LL.B., M.B.A

Written by: Mark Morris, B.A., LL.B., M.B.A