QUICK HITS

• In Ali v. Patel, the Ontario Superior Court ruled that no binding agreement of purchase and sale was formed because the seller’s inclusion of Schedule B, which was not signed by the buyer, constituted a counteroffer rather than acceptance of the buyer’s offer.
• The court emphasized that a binding contract requires a “meeting of the minds” on all essential terms, which was absent in this case as the buyer neither signed nor agreed to the amended terms.
• Consequently, the buyer was not liable for the $50,000 deposit, illustrating the importance of ensuring all terms are finalized and agreed upon before declaring an agreement binding.

In Ali v. Patel, 2024 ONSC 3505 (CanLII), the Ontario Superior Court of Justice determined that a binding agreement of purchase and sale had not been formed between a seller and buyer because the seller had added a schedule which had not been signed by the buyer.’

The buyer’s unconditional offer

On Jun. 5, 2023, the buyer made an unconditional offer to purchase the seller’s property, which was irrevocable until 11:59 pm on the following day. The offer to purchase contained an offer summary document, an offer of purchase and sale, and a Schedule A. 

On the evening of Jun. 6, 2023, the seller’s agent sent the signed offer back by email. The price, deposit, closing date and Schedule A remained unchanged. However, the seller added a notation on the first page of the agreement indicating that it now included a Schedule B. The cover email stated: “Can you have your clients initial Schedule B and on the first page that there is a Schedule B?  Accepted offer and deposit info attached.” There was no new irrevocable date proposed. 

The form of the Schedule B document included provisions dealing with issues such as defined “banking days” and how the parties would conclude the transaction in the event that banks and registry offices were closed on the anticipated closing date, the timing and form of deposit and where the keys would be left. The MLS listing for the property included a stipulation that all offers were required to include Schedule B.

Schedule B was not attached to the agent’s initial email enclosing the signed offer. A few minutes later, however, the agent re-sent the documents, this time attaching Schedule B, under cover of an email stating “Sorry. Use this.” The buyer did not respond or deliver the $50,000 deposit required by the agreement.

The controversy over Schedule B

The next morning, on Jun. 7, 2023, the buyer advised that they would be unable to proceed with the transaction for unforeseen family reasons. The buyer sent the seller a mutual release later that day. The seller did not sign the release. Rather, the seller’s agent sent an email advising that her clients would hold the buyer liable for any loss or damages.

The seller re-listed the property. One week later the seller sold the property for $25,000 less than the previous buyer had agreed to pay.

Litigation ensued and the seller ultimately brought a motion for summary judgment concerning the buyer’s liability for the $50,000 deposit. The seller argued that there was a binding agreement and that they were entitled to the $50,000 deposit that should have been paid by the buyer.

A “counteroffer” is a non-acceptance of a previous offer

The motion turned on the issue of whether the addition of Schedule B in the final version of the agreement and the demand from the seller that the buyer acknowledge the Schedule by signatures and initials, was a counteroffer that needed to be accepted by the buyer to form a binding agreement.

The court referred to the principle that—by definition—a “counteroffer” is a non-acceptance of a previous offer. In order for a binding agreement to be formed, there must be a meeting of the minds. The court may look beyond the formal written document, to the words and conduct of the parties, if all the essential terms have been agreed upon.

First, the seller argued that there was a binding agreement in place because Schedule B did not include essential elements of the contract.

The motion judge noted that the circumstances were unusual because Schedule B did not address what would typically be considered necessary and essential clauses to find that there had been a meeting of the minds and the conclusion of a binding agreement. 

“Their return of the agreement including Schedule B was therefore a ‘counteroffer’ which the buyer was free to accept—or not.”

However, the treatment of Schedule B by the seller as a necessary inclusion in any final agreement indicated that it was essential in their view. Their return of the agreement including Schedule B was therefore a “counteroffer” which the buyer was free to accept—or not.

Second, the seller argued that they had accepted the buyer’s offer without attaching Schedule B, so a binding agreement was struck, and their later communication which included Schedule B came after a contract already existed. This argument was rejected since the failure to include Schedule B in the agent’s first email was obviously inadvertent, as is evident in the wording of the follow-up email stating “Sorry. Use this”.

Counteroffer or binding agreement?

The motion judge commented that the argument might be more persuasive if the facts were that the seller had fully accepted the offer and then later changed their mind to decide that they wanted to include a new Schedule or additional provisions to the deal. 

The argument then would be that, in fact, there was no counteroffer and a binding offer was in place, and any events thereafter could not impact the already existing contract. However, that is not what occurred.

Rather, the signed counteroffer was inadvertently sent without Schedule B. The email referenced Schedule B and asked that the buyer initial the first page of the offer document and sign Schedule B. 

In the motion judge’s view, giving effect to the seller’s argument would have ignored the fundamental contractual law principle that a contract requires a meeting of the minds to be formed. Here, there was no meeting of the minds as the buyer did not sign or accept any agreement that included a Schedule B.

No binding agreement, no deposit liability

In the result, the court found on a balance of probabilities, that the returned agreement was a counteroffer, and that the seller viewed Schedule B as a necessary component of a concluded agreement. As the counteroffer was never accepted or signed by the buyer, no binding agreement was reached. The buyer was therefore not liable to pay the deposit.

The decision demonstrates that a party should be cognizant that changing or adding any terms to an offer may constitute a counteroffer that requires acceptance. Schedules or other additional terms should be included in the original form of the offer that is intended to be accepted without further negotiation. 

In Stayside Corporation Inc. v. Cyndric Group, the Ontario Superior Court of Justice was faced with a dispute that turned on which of the contracting parties was responsible for the failure to obtain a severance of the land to be sold.

Pre-transaction obligations

Pursuant to an Agreement of Purchase and Sale (APS) dated Aug. 13, 2014, the seller, Cyndric Group Inc. (Cyndric), agreed to convey 50 acres of a 100-acre property in the Township of Russell, Ont., to 6773711 Canada Inc. (677), in trust. The purchase price was $3.5 million with a $1 deposit and $1 million due on closing, with the balance of $2.5 million payable by way of a vendor take-back mortgage. The owner of 677 incorporated a second corporation, Stayside Corporation Inc., to take an assignment of 677’s rights and obligations under the APS.

Cyndric intended to retain ownership of the remaining 50 acres of land. Accordingly, the transaction could not be completed without a severance of the 50 acres of property under the Ontario Planning Act.

The APS included a condition to be satisfied or waived by Dec. 5, 2014, providing the buyer, 677, with the opportunity to confirm that the property was suitable for its intended development.

The buyer also had the right during the conditional period to instruct Cyndric to commence the severance of the 50 acres upon payment of $5,000. The APS provided that closing was to be completed within 30 days following the waiver of conditions if Cyndric had obtained the severance. Otherwise, closing was to occur 30 days after the severance was obtained.

Unwritten amendment

By Dec. 5, 2014, however, the buyer had not waived the condition, nor had it paid $5,000 for Cyndric to apply for a severance.

Subsequently, and without any formal written amendment to the APS, the parties agreed that 677 would be responsible for the severance of the 50 acres. 677’s owner confirmed via email that the APS had been extended to Mar. 31, 2015, and that the property was suitable for their intended development, thereby waiving the condition.

The severance did not take place. In March 2018, Cyndric refused to provide any further extensions for the completion of the severance process and took the position that the transaction was terminated.

Litigation ensued and led to a claim by the buyer to compel the completion of the transaction. The seller brought a motion for summary judgment to dismiss the buyer’s claim.

In the motion judge’s view, the central issue was whether the buyer had committed an anticipatory breach of the APS by failing to diligently proceed with a severance application, thereby justifying the termination of the APS by Cyndric.

The buyer argued that the delay in obtaining a severance was caused by either the failure of Cyndric’s owner to provide confirmation that he could bind the corporation or a delay on the part of the municipalities involved with the severance process.

Delays and terms

There was evidence filed for the motion that the typical timeline to obtain a severance in the municipality was approximately 90 days from the time that the application is filed. While the parties disputed the reasons why the severance was not obtained, it appeared to the motion judge that the buyer was waiting to see if the municipality would provide water/sewer service to the 50 acres. However, this was not a condition or term of the APS and did not provide the buyer with a reasonable excuse for the delay. A hook-up service for water/sewer was not necessary for a severance application.

The motion judge concluded that the court could infer from the terms of the APS and the renegotiation of the original closing date that the severance process would proceed expeditiously, and a four-month window was reasonable for a party to obtain a severance. In that regard, a new date had been set for Mar. 31, 2015. The terms in the APS were that “time is of the essence” and that the closing would take place 30 days after the severance and appeal period remained in effect.

“In the court’s view, this amounted to a failure to show that the buyer was at all times ready, willing and able to proceed with the purchase.”

The evidence showed that the buyer had demonstrated a pattern of delay and a “consistent disregard for a fundamental term of the agreement,” which was to move towards a severance in order for the transfer of the 50 acres to proceed. The seller, conversely, repeatedly requested the status of the severance application and extended deadlines for a closing date.

The court referred to the law concerning anticipatory breach outlined by the Court of Appeal in Spirent Communications of Ottawa Limited v. Quake Technologies (Canada) Inc., affirming that “an anticipatory breach sufficient to justify the termination of a contract occurs when one party, whether by express language or conduct, repudiates the contract or evinces an intention not to be bound by the contract before performance is due.”

In the case at hand, the severance process was fundamental to the closing and was a fundamental term of the APS. The buyer’s failure to proceed expeditiously with the severance deprived the defendants of the use of the property, and there was a pattern of delay in moving forward with the severance. Without a severance, the APS could not be completed.

Further, not only did the buyer fail to proceed to obtain a severance, but they did not provide evidence on the motion that they had access to funds that would be due on closing. In that regard, the buyer’s lawyer objected to questions pertaining to the buyer’s ability to access funds to close during cross-examinations for the motion.

In the court’s view, this amounted to a failure to show that the buyer was at all times ready, willing and able to proceed with the purchase.

Implications of delay

Lastly, on the issue of the buyer’s claim for specific performance, there was no evidence of any specific development plans, nor did the buyer secure any tenants or subsequent purchases. Merely engaging in land speculation is not enough to meet the criteria of uniqueness required by the case law. The buyer’s claim for specific performance requiring Cyndric to complete the sale was rejected, and Cyndric was granted an order for summary judgment dismissing the claim.

The decision shows that the terms of an agreement for the purchase and sale of land and any amendments thereto should be carefully prepared and reviewed to ensure that each side is aware of their obligations and that any agreed-upon deadlines are met. While courts will generally expect a level of cooperation between the parties, a failure to complete one’s obligations in a timely manner may amount to an anticipatory breach of the agreement, thereby entitling the other party to terminate the transaction.