Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
Contents
INTRODUCTION ..........................................................................................................................................................6
OUTLINE..................................................................................................................................................................6
1. Transaction .....................................................................................................................................................6
2. Financing a real estate transaction.................................................................................................................6
BACKGROUND ........................................................................................................................................................6
BC Land Title System (Torrens System) ..............................................................................................................6
LTA s 23 - Effect of indefeasible title ..............................................................................................................6
LTA s 20 - Unregistered instrument does not pass estate – no unregistered instrument can affect title .....7
LTA s 28 - Priority of charges based on time of registration ..........................................................................7
LTA and Equitable Ownership ............................................................................................................................7
LTA s 33 - Equitable mortgage or lien not registrable ....................................................................................7
MARKETING THE PROPERTY .......................................................................................................................................8
LISTING AGREEMENTS ............................................................................................................................................8
Types of Listing Agreements: .........................................................................................................................8
Legislation that APplies to Listing Agreements and Agents ...............................................................................8
Real Estate Services Act ..................................................................................................................................8
Real Estate Council Rules................................................................................................................................9
Carmichael v Bank of Montreal (1972) Man QB.............................................................................................9
AGENTS ................................................................................................................................................................ 10
Elements of an Agent ...................................................................................................................................... 10
LAC Minerals Ltd v International Corona Resources Ltd (1989) SCC ........................................................... 10
Who is Principal ............................................................................................................................................... 10
Knoch Estate v Jon Picken Ltd (1991) ONCA ............................................................................................... 10
Winners v Goddard & Smith (1992) BCSC ................................................................................................... 11
DUTIES TO Parties in the Transaction.............................................................................................................. 12
Real Estate Services Act RULES ss 5-1 to 5-15 ............................................................................................. 12
Price et al v Malais et al (1982) BCSC .......................................................................................................... 12
Duties Owed to Third Parties .......................................................................................................................... 12
Bango v Holt (1971) ..................................................................................................................................... 12
Dodds v Millman .......................................................................................................................................... 12
Smith v Yeasting and Yeasting (1955) BCSC ................................................................................................ 13
Duties of Agents (SUmmary) ........................................................................................................................... 13
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
REMUNERATION OF AGENT ............................................................................................................................ 13
Banfield v Hoffer (1977) Man CA ................................................................................................................. 14
Block Bros. Realty Ltd. v Viktora (1974) BCCA ............................................................................................. 14
McInerny Realty Ltd v Academy Aluminum Products Ltd (1980) ABCA [No Right to Remuneration] ....... 14
THE CONTRACT OF PURCHASE AND SALE ............................................................................................................... 14
THE CONTRACT .................................................................................................................................................... 14
Standard Form Contract of Purchase and Sale................................................................................................ 14
Letters of intent/enforceability ....................................................................................................................... 17
387903 BC Ltd v Canada Post Corp (1995) BCSC ......................................................................................... 17
Option .............................................................................................................................................................. 17
Right of First Refusal ........................................................................................................................................ 17
PROBLEMS WITH REAL ESTATE CONTRACTS ....................................................................................................... 18
Evidentiary Issues ............................................................................................................................................ 18
Other issues with Contracts ............................................................................................................................ 18
Nicol v Weigel (1991) BCCA (doctrine of part performance and reliance) ................................................. 18
The 3 P’s and Vagueness/Uncertainty ............................................................................................................. 18
Arnold Nemetz Engineering Ltd v Tobien (1971) BCCA [Certainty of Price].............................................. 19
First City Investments Ltd v Fraser Arms Hotel Ltd (1979) BCCA ................................................................ 19
DEPOSIT ............................................................................................................................................................... 19
Purpose of Deposits......................................................................................................................................... 19
Handling of Deposit ......................................................................................................................................... 19
Lozcal Holdings Ltd v Brassos Dev Ltd (1980) ABCA .................................................................................... 20
Deposit vs. Consideration ................................................................................................................................ 20
Hughes v Lukuvka (1970) BCCA (deposit has to be genuine preestimate) ................................................. 20
Disputes Regarding Deposits (to return or not to return) ............................................................................... 21
Stockloser v Johnson (1954) QBCA .............................................................................................................. 21
Winley Investments Inc v Milore Sales Ltd (1991) BCSC (general principles of when deposit is forfeited) 21
INTERIM PERIOD .................................................................................................................................................. 21
Relationship Between Vendor/Purchaser ....................................................................................................... 22
Lysaght v Edwards (1875) Eng ..................................................................................................................... 22
Rich v Krause (1975) BCSC ........................................................................................................................... 22
Unpaid Price (Vendors Lien) ............................................................................................................................ 22
Risk................................................................................................................................................................... 22
Martin Commercial Fueling Inc v Virtanen (1997) BCCA ............................................................................. 22
CONDITIONS ........................................................................................................................................................ 22
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
Turney v Zhilka (1959) SCC [property couldn’t be annexed to Village of Streetsville] ............................... 23
Dynamic Transport Ltd v OK Detailing Ltd (1978) SCC ................................................................................ 23
Wiebe v Bobsien (1984) BCSC ..................................................................................................................... 23
Griffen v Martens (1978) BCCA ................................................................................................................... 24
Waiver or Satisfaction ..................................................................................................................................... 24
Kitsilano Enterprises Ltd v G&A Developments Ltd (1990) BCSC ................................................................ 24
Tau Holdings Ltd v Alderbridge Development Corp (1991) BCCA (looked like it was subjective but wasn’t)
..................................................................................................................................................................... 25
Aboriginal Title .................................................................................................................................................... 25
WARRANTIES/REPRESENTATIONS ....................................................................................................................... 26
FINANCING THE PURCHASE ..................................................................................................................................... 26
MORTGAGES ........................................................................................................................................................ 26
North Vancouver (District) v Carlisle ........................................................................................................... 27
ELEMENTS OF A MORTGAGE ............................................................................................................................... 27
Legal Mortgage ................................................................................................................................................ 27
Equitable Mortgage ......................................................................................................................................... 27
Royal Bank of Canada v Mesa Estates Ltd ................................................................................................... 28
North West Trust Co v West [Alberta]........................................................................................................ 28
Common Elements .......................................................................................................................................... 29
Knightsbridge Estates Trust Ltd v Byrne ...................................................................................................... 29
Structure of Mortgage ..................................................................................................................................... 29
STATUTORY PROTECTIONS and Provisions that Apply to Mortgages ................................................................. 29
Provincial ......................................................................................................................................................... 29
Mortgage Brokers Act Part 2 ....................................................................................................................... 29
Business Practices and Consumer Protection Act Part 5............................................................................. 30
Federal ............................................................................................................................................................. 30
Interest Act s 10 ........................................................................................................................................... 30
Potash v Royal Trust Co ............................................................................................................................... 31
Interest Act s 6 ............................................................................................................................................. 31
Interest Act s 8 ............................................................................................................................................. 32
Re: Weirdale Investments Ltd v CIBC (1981) Ont High Court Justice .......................................................... 32
Raintree Financial Ltd v Bell (1993) Supreme Court .................................................................................... 32
Criminal Interest Rate (Criminal Code ss 347, 347.1) .................................................................................. 33
Garland v Consumers’ Gas (1998) SCC ........................................................................................................ 33
Nelson v CTC Mortgage Corporation (1984) BCCA ...................................................................................... 34
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
ENFORCEMENT .................................................................................................................................................... 34
Assignment of Mortgage ................................................................................................................................. 34
Property Law Act (provisions that deal with transfer of mortgage) ........................................................... 34
Liens ................................................................................................................................................................. 35
Mortgage Default Situation ............................................................................................................................. 35
DEFAULTS ................................................................................................................................................................ 36
tITLE ..................................................................................................................................................................... 36
vENDOR’S oBLIGATION .................................................................................................................................... 36
Property Law Act ......................................................................................................................................... 36
Land Transfer Form Act Schedule 2 ............................................................................................................. 36
What constitutes a title default....................................................................................................................... 36
Re Hughes (1969) BCSC
[PROF: hates this case; messes with Torrens System principles] .................. 36
Caplan v Coles (1982) BCSC ......................................................................................................................... 37
Condition of Property/Misrepresentation .......................................................................................................... 37
Patent/Latent Defects ..................................................................................................................................... 37
Gronau v Schlamp Investments Ltd (1974) Man QB ................................................................................... 37
Error in Substantialibus ................................................................................................................................... 38
Hyrsky et al v Smith (1969) Ont HC ............................................................................................................. 38
TIME OF THE ESSENCE ......................................................................................................................................... 38
Salama Enterprises (1988) Inc v Grewal (1992) BCCA ................................................................................. 39
Ambassador Industries Ltd v Kastens (2001) BCSC ..................................................................................... 39
Norfolk v Aikens (1989) BCCA...................................................................................................................... 39
Law and Equity Act s 31 ............................................................................................................................... 40
THE COLLAPSING TRANSACTION ............................................................................................................................. 40
TENDER ................................................................................................................................................................ 40
Norfolk v Aikens........................................................................................................................................... 40
Repudiation ..................................................................................................................................................... 41
Shaw Industries Ltd v Greenland (1991) BCCA ............................................................................................ 41
REMEDIES ............................................................................................................................................................ 42
Specific Performance ....................................................................................................................................... 42
Semelhago v Paramadevan et al (1996) SCC ............................................................................................... 42
Forfeiture of Deposit ....................................................................................................................................... 43
Hirst et al v Moore et al (1955) BCSC .......................................................................................................... 43
Mavretci v Bowman (1993) BCCA................................................................................................................ 43
Vendor’s Lien ................................................................................................................................................... 43
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
Gordon v Hipwell (1952) BCCA .................................................................................................................... 44
Purchaser’s Remedies...................................................................................................................................... 44
Rescission ........................................................................................................................................................ 44
Frustration ....................................................................................................................................................... 44
COMPLETION/CLOSING ........................................................................................................................................... 44
PROCEDURE ......................................................................................................................................................... 44
Using Undertakings ......................................................................................................................................... 45
POST-COMPLETION ................................................................................................................................................. 45
Doctrine of MERGER ............................................................................................................................................ 45
Implied Covenants ............................................................................................................................................... 46
Warranty of Fitness (Habitability) ................................................................................................................... 46
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
INTRODUCTION
OUTLINE
1. TRANSACTION
1. Negotiation of terms – price, conditions, etc.
2. Conditional period – conditions not fulfilled yet
- contract binds parties so V can’t sell to someone else while conditions are outstanding
- P must attempt to fulfill conditions; V must remove conditions once fulfilled by P
3. Binding agreement – once conditions fulfilled
- P has obligation to buy; V has obligation to sell
- contract will specify what state title should be in when P receives it (clear or subject to certain
accepted encumbrances)
- V obligated to provide title in this state
- V has responsibility to put title in state it needs to be in for closing
4. Completion
- Statement of Adjustments (P reimburses V for taxes paid that cover portion of year P will own
property)
- commercial deals: additional adjustments, ex. monthly rents in mall complex
- Form A Transfer (required by LTA, register to transfer title)
- P pays Property Transfer Tax (1% on first 200,000 and 2% on amount over 200,000)
- P pays GST on new construction and/or substantially renovated property
2. FINANCING A REAL ESTATE TRANSACTION
- Bank can only finance up to 75% of market value/purchase price [Bank Act]
- can finance more if balance is insured (insurance pays bank if P defaults)
BACKGROUND
BC LAND TITLE SYSTEM (TORRENS SYSTEM)
- In BC we have modified Torrens system
- means you can rely on registry; don’t have to prove title every time you transfer
System is based on two provisions in the Land Title Act:
LTA s 23 - Effect of indefeasible title
 Title can’t be defeated by a prior claim
 Title Certificate is conclusive evidence of title
o Except for any registrations or exceptions made in original Crown grant [LTA s 23(2)(a)]
 Most of BC is provincial/federal Crown land
 Crown is authorized to give away land:
 1. By lease – leases land temporarily; temporary occupation of Crown land
 2. Crown grant – essentially a transfer
 Crown land governed by Land Act until transferred to private individuals – this brings it
under jurisdiction of LTA
 EXCEPT if granted to a First Nation; not governed by LTA
 1. Reserve lands = governed by Indian Act
 2. Treaty lands = owned independent of government, band makes own bylaws
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Real Estate Transactions
Law 455 – Greg Umbach
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Fall 2011
Exceptions to LTA s 23 – where title may be subject to other things:
o Crown grant can contain exceptions, ex. Crown reserve natural resources [s 23(2)(a)]
o Taxes – can form a lien on title [s 23(2)(b)]
o Right of government to expropriate land [s 23(2)(f)]
o Lease to a tenant for less than 3 years where tenant is in actual occupation [s 23(2)(d)]
 If contract doesn’t specify that tenant has to move out – your title is subject to that
tenant living there
o Anything that is registered on title [s 23(2)(g)]
o Fraud – if you obtained title by fraud you are not protected by indefeasible nature of that title [s
23(2)(i)]
Anything that can be registered as a charge is an interest in land (a less than fee simple interest) [s
26(1)]
o Indefeasible nature of title applies to charges too
LTA s 20 - Unregistered instrument does not pass estate – no unregistered instrument can affect title
 Parties can be bound by an unregistered charge – but it can’t affect the land unless registered
o Unregistered instrument generally can’t affect third parties looking at title
o Unregistered contract does affect parties to the contract – it isn’t undo just because it isn’t
registered
 PROF: BC judges are eroding this principle by using equitable jurisdiction to override statute where you
knew something or should have known something – he DOESN’T LIKE THIS
LTA s 28 - Priority of charges based on time of registration
 Priority of charges is determined by date and time of registration – not of execution
 If two charges with same date/time – priority determined by serial number
 EXCEPTION: subject to contrary intention appearing from instruments creating the charges
o Priority agreement – to change priority of charges on title
o Municipal easements will insist on priority agreement over mortgages – to ensure they won’t be
cleared from title if mortgage defaults
LTA AND EQUITABLE OWNERSHIP
 LTA doesn’t recognize split between legal and equitable ownership – assumes registered party holds
both
 CL allows registered owner to hold legal title and have unregistered agreement off title that says it holds
title in trust for some other party (equitable owner)
o LTA s 20 – as between parties making agreement it is enforceable; but it doesn’t affect third
parties looking at the title
 LTA s 27 – registration of charge gives notice to every person dealing with the title
o [companies use this trust mechanism to avoid paying property transfer tax – company holds
legal title and individual buys all shares of company to become owner of property]
LTA s 33 - Equitable mortgage or lien not registrable
 Equitable mortgage or lien is not registrable
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
MARKETING THE PROPERTY
LISTING AGREEMENTS
Listing agreements set out:
1. What property
2. How long listing will last
3. Rights, powers of agent and responsibilities
4. How agent gets paid
Types of Listing Agreements:
MLS (Multiple Listing Service) Agreement:
 Agreement amongst all agents in an area – Real Estate Board in that area self-regulates all agents in that
area; Board creates its MLS agreement (all MLS are similar but slight differences depending on Board)
o Property is put up on the MLS service – all realtors who are part of MLS can see listing, are
empowered to show property
o Gives contractual authority to agent to communicate with other agents and use them to help
sell property
 Only the agent who enters agreement with V has privity of contract (not all MLS agents)
o Other agents have privity with V’s agent – contract for how to split commission
General or Open Agreement:
 Less common
 V can hire an agent and agree to pay commission on completion, but is open to hire other agents too –
only pay commission to the agent that actually sells the property
Exclusive Listing Agreement:
 Hire one agent to the exclusion of all others – agent you hire has only right to sell property, pay them
commission no matter who is responsible for sale
Dual Agency Representation Agreement – means agent is representing you and other party; signor understands
that agent can’t keep secrets from anyone; allows agent to get full commission (usually has to split)
Commercial context:
- rarely use MLS system
- often have multiple agents
- P may also hire an agent (doesn’t happen in residential); P’s agent get pays flat fee by P or this gets trumped by
sharing commission
LEGISLATION THAT APPLIES TO LISTING AGREEMENTS AND AGENTS
Real Estate Services Act
 Policy for licensing agents = protecting the public
 Person can’t provide real estate services for remuneration without a license [RESA s 3]
o Real estate services include: rental property management services, strata management services,
trading services (including real property, cooperatives, shared interest, time share, mortgages)
[RESA s 1] – net cast broadly to catch most services
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Real Estate Transactions
Law 455 – Greg Umbach
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If you do provide services without a license – you can’t enforce the contract for commission [RESA s 4]
o If V is stupid enough to pay unlicensed person – there is nothing he can do either
o If you call commission a “finders fee” or anything else – still can’t enforce it if not licensed
o EXCEPTION: a lawyer can provide these services without license in the course of his practice –
therefore can also collect commission [RESA s 3(3)(f)]
Licensing important because realtors deal with other people’s money – deposits put in trust accounts
Trust created by statute
o Real Estate Services Act, ss 31, 32, 33
o Money received is to be held in trust
o Nothing can be done with it unless:
 1. All parties to the contract consent to release of the trust
 2. Terms of the listing agreement for collecting commission are met
 RULES 5-15 – on date on which documents effecting transfer are submitted to
the LTO for registration
 3. Court tells you how to deal with it [RESA s 33(5)]
Money given as deposit – one of primary purposes is it is first money realtors will look at to get their
commission (BUT very limited in when they can access that money)
Real Estate Council Rules
 If an agent breaches rules or provisions of RESA the Real Estate Council is responsible for discipline
 Council is subject to rules of fairness, natural justice and is regulated by the statute (RESA)
o Has certain powers under statute to conduct inquiries into complaints, can hold hearings, some
capacity to subpoena witnesses
o Appeal of decision of the Council goes to Financial Institution Tribunal and then after to the BC
Court of Appeal
o Council remedies: fines, suspension, revoke licence, order remedial education (often does this)
 Real Estate Services Act Part 5 – sets up a fund to reimburse people defrauded by agents
o Limited to claims for money – trust funds that go missing
Carmichael v Bank of Montreal (1972) Man QB
 Held: communication of acceptance to sub-agent involved through MLS system is sufficient to
communicate to principal
 Delegatus non potest delegare
o An agent can’t (without permission from principal) place the obligations he has personally
undertaken to fulfill on someone else
o Authority to delegate can’t be implied as an ordinary incident in the contract – confidence in the
particular agent is at the root of the K of agency
 Circumstances in which authority to delegate is implied:
1. within practice of the business (and isn’t unreasonable/inconsistent with agent’s express terms of
authority)
2. where the client knows when he hires the agent that the agent intends to/may delegate
3. conduct shows intention to allow delegation
4. unforeseen circumstances arise which make it necessary for agent to delegate – ie. in emergency
5. authority given is of a nature which requires execution wholly or in part by a sub-agent – ie. some
of agent’s duties couldn’t be fulfilled without hiring someone else
6. action delegated is purely administrative – doesn’t involve confidence or discretion
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Real Estate Transactions
Law 455 – Greg Umbach
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Camille Chisholm
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Court looks at whether BMO (as client) contemplated that another party might act as its agent (particularly
in communicating acceptance); considered:
o Experience with MLS system
o Knowledge that agreement allows some delegation of authority
o Familiarity with trade/nature of the business (residential marketing)
o Actions had allowed some delegation of authority – allowed counteroffer to be communicated to
sub-agent
Consider what the action is and then apply analysis – would the principal have thought that was something
that would be delegated
AGENTS
ELEMENTS OF AN AGENT
 CL – an agent is one who acts for/is empowered to act for another in his place and has been given direct
authority
o More reactive – may not have responsibility to be proactive in protecting principal’s interest
 Fiduciary – in special relationship with principal founded on trust or confidence in fidelity of fiduciary
o Has active duty to protect principal’s interests; not to act in its own benefit
 Realtors can have fiduciary duties overlapped on top of statutory duties
LAC Minerals Ltd v International Corona Resources Ltd (1989) SCC
 Fiduciary law is concerned with the duty of loyalty and does not require that harm result
o Fiduciary duties can only arise in a direct relationship
o Fiduciary obligations only arise in equity and can only draw upon equitable remedies
 HOW TO DISCOVER A FIDUCIARY RELATIONSHIP:
(1) The fiduciary has scope for the exercise of some discretion or power OR there was a repose of trust or
confidence
(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or
practical interests OR was there an industry standard that saw one party being able to exercise unilateral
discretion
(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power
[court put a lot of emphasis on this third factor]
o Vulnerability or its absence is not conclusive - it must be considered if it is present in the facts
WHO IS PRINCIPAL
Knoch Estate v Jon Picken Ltd (1991) ONCA
Facts: Picken (purchaser agent) introduces Mantella to Knoch Estate property; Picken also works for Caterpillar
(who would have paid a higher price for the property). Picken then brokers a deal between Mantella &
Caterpillar. Knoch Estate sues Picken, alleging that he should have introduced Caterpillar to them so they could
get higher price [note that Picken is purchaser’s agent, not vendor / Knoch Estate’s]
 V’s agent - Generally held to be fiduciaries owing highest obligation of full disclosure and fair dealing to V
who pays the commission
o duty arises from the confidential nature of the relationship that forms when the agent undertakes to
list and sell the property under a listing agreement
o V is legally entitled to expect that his real estate agent will faithfully serve to promote V’s interests
 P’s agent - may be the agent of the V for limited purposes – which include authorization to present an offer
to purchase and to receive notices to the V as well as to make representations binding on the V
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
o



The selling agent is also obliged not to deceive or mislead the V (court: not telling a secret is not
deceiving)
o But in the absence of the characteristics of a true fiduciary relationship between V and selling agent,
the law doesn’t require more than this from a selling agent
Picken represented purchaser not vendor – no direct contractual relationship with V
Agent of V at least to limited extent that he was impliedly to bring offers of purchase to V
o Mere fact of being agent for this limited purpose doesn’t put him into position of fiduciary
[Court also found that this V didn’t suffer any damages – it got its asking price, got what it anticipated]
Winners v Goddard & Smith (1992) BCSC
 General rule: delegation doesn’t create privity of contract between principal and sub-agent. The principal
may sue and by sued only by his agent, and the sub-agent may only sue and be sued by the agent.
 Subject to some qualifications:
o Acts of the sub-agent whose appointment was authorized by the principal bind the principal as if
they had been done by the agent himself
o Agent may establish the sub-agent as an agent for the principal if he has been expressly or impliedly
authorized to create that relationship, or if his act is ratified, and it is the intention of the agent and
the sub-agent that such relation should be constituted
o No privity merely because the delegation was effected with authority of the principal
 Contractual rights between the principal and the sub-agent can only arise when there is an intention on the
part of both parties to create a relationship of privity of contract
 A sub-agent’s duty to a principal may arise if a fiduciary relationship exists
 Test for a fiduciary relationship:
o Fiduciary has scope for the exercise of some discretion or power
o Fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or
practical interests
o The beneficiary is particularly vulnerable to or at the mercy of the fiduciary holding the discretion or
power
o It is possible for a fiduciary relationship to be found although not all of these characteristics are
present, nor will the presence of these ingredients invariably identify the existence of a fiduciary
relationship [Lac Minerals]
o Trust or confidence and the expectation of benefit on the part of the fiduciary are normally a
feature of the cases in which a fiduciary obligation arises [Lloyds Bank]
 Privity of contract is not necessary to the creation of a fiduciary relationship
 While duties of selling sub-agents to vendors may be implied from the circumstances in which the subagency was created – there is no general rule that a privity of contract arises between the selling agent and
the principal in all MLS contracts
o The relationship of privity of contract can’t arise without proof that the relationship was created,
either expressly or by implication
 In the facts of this case:
o All obligations to pay commission are expressed by the listing agreement and agreement of sale and
purchase – to be obligations owed by the V to the listing agent
o The agreement to pay the selling agent a portion of that commission is found in the agreement
between selling agent and listing agent
 This agreement can’t impose an independent obligation on the V to pay commission directly
to the selling agent
 The selling agent must look to the listing agent for its commission
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
DUTIES TO PARTIES IN THE TRANSACTION
Analyzing duties an agent owes:
1. look to contract (what is contract between agent and principal) – if not a direct agent is there privity of
contract through principal and sub-agent
2. aside from contractual duties – there are CL duties imposed on all agents in transactions
a. responsibility to communicate offers (case? Carmichael)
b. responsibility not to deceive (Knoch Estate)
3. is there a fiduciary relationship (if yes then duty not to harm) – to determine, use analysis from Lac Minerals
Real Estate Services Act RULES ss 5-1 to 5-15
 Rule 5-9: must disclose if receiving an interest in land you are representing on (if getting commission or have
ownership interest)
 Rule 5-10: disclose if you have relationship with any of the parties (family, business)
Price et al v Malais et al (1982) BCSC
 No general proposition that a realtor must always search title of a property listed with him, but in many
cases this would be advisable
 The agent, being on notice as she was, is liable because she failed to exercise the degree of care and skill
that is expected of an agent in such circumstances
o She had an obligation to conduct this piece of business in a way which would protect both
parties, particularly the Vs who employed her and who were to pay her a substantial fee for her
services
 Agent owes duty to client to act and exercise the reasonable care and skill in keeping with the standards
of the profession
o Standard of profession: always look at title; failure to do this is breach of duty of care
DUTIES OWED TO THIRD PARTIES
Bango v Holt (1971)
Facts: P bought house thinking it could be licensed as a duplex but the V had signed a statutory declaration that
it wouldn’t be used for rental ever again
 P’s agent considered her obligation didn’t extend past using the material given to her by the listing agent
o The information listed was incomplete
o She didn’t know whether this was a revenue property or not
o It was her duty to get all information that would be relevant and useful to the P
 P’s agent’s obligation included the duty to be honest in making any statement and the requirement to
exercise such special skill and care in doing so as was comparable to that of others engaged in the same
occupation
o In carrying out these duties she and V’s agent fell below the reasonable standard required of
persons in the same occupation
 Result: agent was held liable for the P’s damages
Dodds v Millman
Facts: V's agent selling an apartment complex made a statement about the rents to make the financials look
better than they actually were. P buys and finds out this wasn't the case, so they sued V and V's agent.
 This is an active deception - agent held responsible, breached CL duty not to deceive
 The V was vicariously liable for his agent's actions
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Real Estate Transactions
Law 455 – Greg Umbach
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Camille Chisholm
Fall 2011
You have to police your agent to make sure they aren't saying something that is a lie - read the
description they put on MLS
Smith v Yeasting and Yeasting (1955) BCSC
Facts: Action for specific performance of an agreement for sale of lands
Agent knows representation is false, makes the misrepresentation to induce the purchase and does induce it.
The representation was not authorized by the V and not based on anything she had said to the agent. In fact, V
had given the agent the information which gave him knowledge that what he said was false.
Issue: Is the V liable for the fraud of the agent?
 “The principal and the agent are one, and it does not signify which of them made the incriminated
statement or which of them possessed the guilty knowledge.” [S. Pearson & Sons Ltd v Dublin Corp]
 “The proposition that a principal can’t escape the consequence of his agent’s fraud by any limitation of
his agent’s authority is now well established” [Hughes v Ojibway Realty Co]
o If an agent employed with strict injunctions to behave honestly is nevertheless dishonest in the
course of his master’s business, the master is answerable for his fraud
 The view of the BCCA and the SCC is that a principal is liable for the fraud of the agent [Howse v Quinnell
Motors Ltd; Internat’l Casualty Co v Thomson]
Held: Purchaser allowed to rescind contract due to fraudulent misrepresentations of agent.
DUTIES OF AGENTS (SUMMARY)
 Duties of an agent
o Can be seen as a fiduciary: duty not to harm (see Lac Minerals)
o Must exercise the standard and skill of their profession; owe duty to all parities in the
transactions (Bango v Holt; Price v Malais)
o Have to act honestly, can’t deceive (all parties) (Knoch Estate)
o If agent makes representation to a party to the transaction, they’re responsible for that
 They have to have performed their diligence to ensure that representation is as correct
as they can determine
 The agent’s client is also liable for agent’s representations (Smith v Yeasting)
o This is on top of the contractual obligations they have [under agency agreement]

Some of the RULES deal with these problems
o If agent makes representation, have to put it in writing (Rule 5-6)
o If have relationship with someone in the transaction, have to disclose that (Rule 5-10)
o If they’re making money off the transaction other than commission, they have to disclose it
(Rule 5-9)
o If somebody else is paying them, other than the seller, they have to disclose that (??)
REMUNERATION OF AGENT
 Residential: agent usually holds deposit (so they can take commission out of it)
o In Contract of Purchase and Sale – deposit provision is vague enough that agents will usually hold
deposit if anything goes wrong; unless both parties agree otherwise
 Commercial: lawyer usually holds deposit
o Commercial agreements usually more specific about what happens to deposit if problems arise
o Ex. include language giving person holding deposit “irrevocable authority” to release the deposit
 To determine how agent will be paid: LOOK AT THE CONTRACT!
o Agreement will set out rate of commission and trigger for claiming commission
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Banfield v Hoffer (1977) Man CA
 No written contract between V and agent; verbal agreement re payment of commission
 Agent introduced P to V but did not complete negotiations or the final contract for sale; P and V completed
agreement much later without help of agent
 Court held that the agent was owed under quantum meruit (“as much as is deserved”)
o Paid in equity for services that were of value to the other side (court implied a contract)
 DISSENT: there was no contract; no meeting of the minds; no contract to imply into; basically agent
shouldn’t have been paid
Block Bros. Realty Ltd. v Viktora (1974) BCCA
 Standard MLS agreement; agreement expires; P comes back after expiration and negotiates sale
 At this point, it had been long enough after expiration of agreement that they couldn’t have intended
commission to still be effective
o TEST: was the agent the effective cause of the sale
McInerny Realty Ltd v Academy Aluminum Products Ltd (1980) ABCA [No Right to Remuneration]
Facts: V and agent both partially responsible for lost sale; V later sells for higher price to new P; agent wants
commission
 GIVES BASIS ON WHICH TO REDUCE COMMISSIONS
 There was both a misrepresentation by V (to agent) and negligence by agent (failing to investigate financial
details)
 Agents have a duty to exercise the skill and diligence of their profession (includes investigating financial
representations about property)
o Agent did not perform her duty with the degree of skill, care and diligence required by the
agreement and so is not entitled to claim the payment provided by it
o Because of agent’s breach of standard of care – V received no benefit from agent’s services,
therefore agent may not claim a commission
 Owner doesn’t get services he bargained for – consideration for agreement fails
 If you can find some kind of negligence/incompetence in agent’s duties – their commission is in jeopardy
THE CONTRACT OF PURCHASE AND SALE
THE CONTRACT
**EVERYTHING WE CONSIDER IN CONTRACT SECTION WILL LOOK TO INTENTION OF PARTIES**
STANDARD FORM CONTRACT OF PURCHASE AND SALE
 Standard form contract used in residential deals – but differs between Real Estate Boards
Three P’s of the Contract:
1. PARTIES/PEOPLE
2. PROPERTY
3. PRICE
 Three P’s are essential elements of the contract – if one is missing you don’t have a contract
o Sometimes won’t be completely certain – but as long as there is way to figure out what P is, it’s ok
Parties
 Describe in sufficient detail to identify them
 Seller: anyone with interest in the land (if multiple parties, all must be included)
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o
If owned by 2 people and only one named on contract = that person is selling their interest (ex. 50%
as tenants in common)
o If owner is a company – exact company listed on title must be named as seller
 Buyer: has to be equally certain
o Using “name and/or nominee”(nominee = someone to be named later) – may not be certain enough
if problems arise later
o Non-Resident (Income Tax Act s 116) – determine if purchase price will be staying in Canada or not
(for tax purposes)
 purchaser has obligation to take reasonable steps to determine if vendor is resident/nonresident
 If seller is non-resident – purchaser obligated to withhold portion of purchase price for 30
days after closing of transaction
 s 116 certificate required from CRA to show that no taxes owed – otherwise purchaser has
to provide all withheld money to CRA
 If purchaser doesn’t do this – they are deemed liable for any taxes owing by vendor
Property
 Legal description is most certain way of describing property
o Next best is civic address – but this can be less accurate
o Finally descriptive address (ex. 3rd house from corner ...) – but this is very risk [makes one P less
certain]
 PROF: preference is to just list legal description – including civic address too leads to more mistakes
Price
 Certainty required – enough to figure out accurately what will be owed
 Commercial transactions: purchase price often “adjusted” (set out adjustments to be made to price)
o Residential: rely on “customary” adjustments
Deposit
 Paid as partial payment of purchase price, guarantee of performance, access to remedies
 Paid on terms set out in contract – when paid, to whom (in trust), paid out to lawyer doing conveyance on
undertakings to complete purchase; if it doesn’t complete, supposed to send it back to whoever was holding
it in trust
 Standard Contract doesn’t set out what happens to deposit if something goes wrong
o Typically don’t invest for interest unless over $200,000
o People often end up paying into court because contract doesn’t say what to do
Terms and Conditions
 Insert conditions here that hold contract in suspension – until they are fulfilled
 Can also include what condition the property will be in
 “Each condition, if so indicated, is for the sole benefit of the party indicated” – assigns the right of who can
waive the effectiveness of the condition
Completion and Possession Date
 If these dates are different – keep in mind who bears the risk of things happening to the property or in the
property in between the dates
Included Items
 Only things that go with the land are fixtures
o Determining if fixture or not – can it be removed with minimal damage to the property?
o If you aren’t sure if it’s a fixture or not – write it in to ensure it will pass with property
Viewed
 Property will be in same condition on Possession Date as on the date it was viewed
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

This is a covenant and representation – seller will keep house in proper repair
If struck out and “as is” written in = no representations made about condition of property (common in
Commercial context)
Title (IMPORTANT)
 This is state of title that is being purchased
 Should be broad enough to include things that are registered on title AND things that are unregistered but
affect title (ex. LTA s 24 – lease for less than 3 years)
 Commercial context: lawyers will search to determine if any statutory liens on title
o Residential: this doesn’t happen
 If there is discrepancy between title agreed to and actual title, purchasers’ remedies:
o 1. Walk away from deal – not what was contracted for
o 2. Close and sue vendor for remaining encumbrance
o 3. Specific performance – don’t close until encumbrance dealt with; make vendor deal with
encumbrance
 [Purchaser’s lawyer should always check title on closing date to ensure it complies with this provision – to
make sure it’s in state you contracted for and if it’s not so you can do one of the above three actions]
Tender
 Everything that has to be delivered has been delivered
 Tender conditions have to be complied with perfectly
 Commercial context: make sure that it is clear that tender can be made on the lawyers and that that will be
effective tender
Time
 “Time is of the essence” = if a time is specified in the contract it must be met perfectly
o If both sides miss the time – contract continues, obligations still exist
 One party has to reset the time; parties may agree to new time
 “Time of the essence” may not apply to new time – state this explicitly
o Seller may terminate the contract and the amount paid by the Buyer will be “absolutely forfeited to
the Seller”
 Seller can keep deposit and may not be the end of its claim for damages
Buyer Financing
 Allows for use of undertaking system to close the deal – if Buyer is relying on financing
o Norfolk v Aikens – court said that if contract doesn’t authorize use of undertakings to close, you’re
not authorized to do it
 If you suggest/try to use this method – you’re making a counteroffer; the other party could
terminate or walk away
Costs
 Buyer bears costs of conveyance
 Courts interpret this to mean Buyer is also responsible for preparing documents
Risk
 In equity – once contract is signed you’ve given away beneficial interest in property (includes risk)
 This provision reverses equity – Buyer is still beneficial owner; seller deemed a trustee and has positive duty
to maintain the property
o If something happens to property before completion, Seller is responsible for repair, etc
Representations and Warranties
 Limits representations and warranties about the property to only those that are written
 Creates survival of these reps and warranties after purchase is completed
o Doctrine of merger – lesser promises are subsumed into the greater
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LETTERS OF INTENT/ENFORCEABILITY
 Commercial Context: negotiations usually start with letter of intent or term sheet
o It’s in the interest of both parties to ensure LOI isn’t binding (it’s not detailed enough) – state that it
isn’t binding
 Residential Context: transaction usually starts with offer; can be ignored, accepted or countered
o Counteroffer almost always focuses on price – but should also consider if conditions are favourable
to you
 It is possible that an LOI can make up the entire contract and be legally binding
387903 BC Ltd v Canada Post Corp (1995) BCSC
Facts: letters of intent signed and terms of documents to give effect to the transactions were subsequently
negotiated. Those documents were signed by Ps but not by management of CPC.
Issues: How to interpret LOI – were they truly non-binding?
 TEST: what is reasonable intention of parties?
o Don’t have to look at the actual state of mind of the promisor
o Consider how the promisor’s conduct would strike a reasonable person in the position of the
promise – would conduct show intention to be bound
 Highly dependent on facts - Court does detailed review of facts; considers:
o Parties always said docs were subject to final approval
o LOI said it was non-binding – nothing in LOI suggested necessary outcome; merely business terms
o Final docs specifically were subject to final approval
o All parties knew transaction couldn’t be completed without management approval
 No oral variation of clear intention to be non-binding would be reasonable
 NEGOTIATION: idea of negotiation is adversarial in nature – no duty to act reasonably in negotiations
OPTION
 Grants a right to do something on the happening of an event (passing of time, specific event, etc.)
 Option is two contracts in one (must be consideration for both contracts):
o 1. Granting of option
o 2. How you actually buy/convey the land
 Ex. Option says you can buy land if you choose to and tell me before May 1
o Optionee’s consideration is potential to buy land; option receiver has to give consideration too
(usually nominal consideration)
o Second step – what are the terms you are buying on if you exercise option by May 1 – there must be
consideration for this agreement too (money paid for the option is not consideration for second
contract)
RIGHT OF FIRST REFUSAL
 Agreement where P is given the right to take a bona fide offer made by a third party to the vendor and
accept it
o Having ROFR doesn’t mean you have a right to buy yet
o If P decides to take that third party offer – third party is out; has no more right
o V can’t accept another offer until they give it to P and P has said no
 ROFR requires its own consideration; and must contain mechanism for closing after ROFR accepted
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PROBLEMS WITH REAL ESTATE CONTRACTS
EVIDENTIARY ISSUES
Statute of Frauds (historical) – said no agreement about land was enforceable unless in writing
Law and Equity Act s 59 – modifies Statute of Frauds (doesn’t do away with it) SEE CHART
OTHER ISSUES WITH CONTRACTS
Oral Agreements: parol evidence prevents admission of oral evidence at court – problem if oral evidence is the
subject of your claim!
Contra Preferentum Rule: person who drafts the agreement will have any ambiguity interpreted against them
[coupled with practice that Buyer bears costs/drafts documents – most likely interpreted against Buyer]
Changes to Agreements: practice in BC of putting notes at the end of the Statement of Adjustments; this doc is
signed by only one party
Keep this in mind when client is signing SOA; is this to client’s advantage; should strike out those Notes
before signing
PROF: this is actually unilaterally giving you a counteroffer; altering the contract
Nicol v Weigel (1991) BCCA (doctrine of part performance and reliance)
 There was an oral agreement between V and P to sell the property. V did not sign anything to confirm this
agreement.
 Law and Equity Act s 59:
o (3) A contract respecting land or a disposition of land is not enforceable unless
 (b) the party to be charged has done an act, or acquiesced in an act of the party alleging the
contract or disposition, that indicates that a contract or disposition not inconsistent with
that alleged has been made
o (4) For the purpose of subsection (3)(b), an act of a party alleging a contract or disposition includes a
payment or acceptance by him or on his behalf of a deposit or part payment of the purchase price
 The $100 deposit paid by P and acknowledged by the V’s agent, is an act acquiesced in by the party to be
charged, the V
THE 3 P’S AND VAGUENESS/UNCERTAINTY
 Fundamental terms of real estate contract – must have certainty of these items; if lacking certainty
about one P, probably don’t have indication of intent by parties to be bound
 Courts will try to imply terms into an agreement – but only to a certain extent
o Will look at the agreement to find intention of parties
 Parties: issue of putting “and/or nominee”
o “and/or nominee” – usually courts are ok with this
o “and nominee” – creates a definite purchaser who is not identified; certainty issue
o PROF: to avoid uncertainty, just include provision in contract that allows you to assign it to
someone else (instead of using “nominee” purchaser)
 Assignment – possible that you can assign a contract even if it is silent re: allowing
assignment, without consent
 But at CL when you assign the original party is not relieved from their obligations under
the contract
 PROF: if you intend to sell the contract, include an assignment provision to be sure
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Arnold Nemetz Engineering Ltd v Tobien (1971) BCCA [Certainty of Price]
Issue: whether the language in the written agreement is so vague and uncertain as to render the agreement
unenforceable; term at issue relates to vendor take-back mortgage
 Every effort should be made by a court to find a meaning, looking at substance and not mere form
o Clause doesn’t fail because of difficulty in interpretation – as long as definite meaning can be found
o Every clause in a contract must, if possible, be given effect to
 But the court is not to make a contract for the parties, or to go outside the words they have used
 In the end – couldn’t determine intention of parties from interpretation of language used; it is too vague;
therefore agreement is unenforceable
First City Investments Ltd v Fraser Arms Hotel Ltd (1979) BCCA
To avoid paying out mortgage broker, Fraser Arms says no binding commitment because some of the 3 Ps were
too vague
Court considered:
1. was there intention to be bound by the agreement
2. can the court resolve the alleged deficiencies in the agreement
 It is only the lack of a term that is so essential to the contract that without it the court cannot collect the
real intentions of the parties from the language within the four corners of the instrument and so cannot
give effect to such intentions by anything necessarily to be inferred that will render the contract
unenforceable
 Court decided that the intention of the parties could be determined from the agreement – any deficiencies
could be resolved by the court looking at the terms of the agreement
 PROF: case shows courts are very willing to look into the agreement and imply terms they need to make if
effective
o Shows some limitations too – courts are not willing to make up terms if the fundamental terms
aren’t present
o Here they found the fundamentals were present and there was enough to fill in the gaps
DEPOSIT
PURPOSE OF DEPOSITS
- The law sees “deposit” as a term that everyone understands
Three purposes:
1. partial payment of purchase price
2. guarantee of purchaser’s sincerity
3. immediate access to remedy – if P defaults it is first source of money that V can have remedy claim over
HANDLING OF DEPOSIT
 Dealt with by the terms of the agreement; there are some CL principles too
o Main principle: simply calling something a deposit imbues it with a special character
o Unless contrary intention expressed in agreement – on default of P, deposit is forfeited to V
o During conditional period the deposit is held – if P decides not to complete after its due diligence
period usually the deposit is refunded
 Once conditions fulfilled and P decides to go ahead – deposit not refundable
 Size of deposit is supposed to be genuine pre-estimate of damages that V will suffer if P breaches
agreement
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o

Liquidated damages - used to indicate parties have put their minds to what true damages would be
– in negotiations they turned their minds to how much damages V would suffer
 Doesn’t have to be accurate number – just genuine pre-estimate of what those damages
could be (it is acceptable for parties to negotiate this)
 “The deposit, if P is in default, is forfeit to the V as liquidated damages without prejudice to
any other remedy that V may have” [used to be clear that V can continue to pursue P if
deposit isn’t sufficient to cover damages]
o Penalty - We don’t allow parties to charge a penalty to a party who breaches (payment provision
that is in terrorem)
 CL won’t enforce payments that are penalties
 Penalty = payment on default that has as purpose to dissuade party from committing
default (not connected in any way with damages that party might suffer)
o Generally the cost to get out of the contract (deposit that would be forfeited) can’t be way out of
proportion to any damages the non-breaching party would suffer
In order to be a deposit – money must be held in trust in some way
o Usually realtor or lawyer
o Hold it in accordance with RESA – no one can do anything with it unless contract or RESA says so
 RESA – can only pay it into court if there is a dispute
Lozcal Holdings Ltd v Brassos Dev Ltd (1980) ABCA
Issue: what does “as liquidated damages” add or take away from court presumption that deposit can be kept on
P’s breach
 V would be entitled to retain the deposit on accepting the P’s repudiation of the contract
o If he resold at an increased price – could still keep the deposit
o If he resold at a loss – he would be entitled to recover that loss, less the amount of the deposit, for
which he would be obliged to give credit
 Deposit is not merely part payment, but a guarantee of performance – therefore it is forfeited if the
transaction goes off
 If we modify the term deposit with “liquidated damages” – must determine if it actually genuine preestimate of those damages
o So V keeping deposit isn’t penalty and amount is enough to be considered fair and end of V’s claim
 While the words used shouldn’t be completely ignored, the courts are more concerned with the intent of
the parties than with the words themselves (whatever you call it – courts will still analyse it for intent)
 “If the intention were to limit the P’s liability that could have easily been said and the court should not
import words into the term ‘liquidated damages’”
o PROF: this is important – DON’T RELY ON LABELS; SAY WHAT YOU MEAN
DEPOSIT VS. CONSIDERATION
Hughes v Lukuvka (1970) BCCA (deposit has to be genuine preestimate)
Issue: argued that a deposit of $5000 paid with an offer to purchase real property in West Vancouver should be
regarded as a penalty and returned to the P in whole or in part
 A term of a contract by which the parties agree that a deposit shall be forfeited as liquidated damages itself
affords evidence of a genuine pre-estimate of damages
o Especially where it can’t be said that the amount is “out of all proportion to the damage”
o Such a term in a contract is not conclusive, but shouldn’t be disregarded without good reason
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DISPUTES REGARDING DEPOSITS (TO RETURN OR NOT TO RETURN)
Analysis for determining if V should keep deposit:
1. Is contract terminated or alive?
If terminated and you called it “deposit” there is prima facie right that V can keep it unless there is
contrary intention in the contract
2. Is the label of “deposit” appropriate for this money – analyze if it is penalty or liquidated damages
If it is a penalty – the court won’t enforce it; probably won’t let V keep the money
If liquidated damages court will probably let V keep it
3. Still have to determine if it is “fair” for V to keep it (Stockloser)
Stockloser v Johnson (1954) QBCA
Issue: action to recover sums of money paid by P to D as instalments of purchase price under two agreements
between parties which were rescinded by D on default in payment by P
Denning LJ: D only wants to keep money which already belongs to him
 The money was handed to him in part payment of the purchase price and as soon as it was paid it belonged
to him absolutely
 When there is no forfeiture clause: buyer is entitled to recover his money once seller rescinds the contract
(subject to cross-claim by seller for damages)
 When there is a forfeiture clause or money is expressly paid as a deposit: the buyer who is in default
cannot recover the money at law at all
o Equity can relieve the buyer from forfeiture of the money and order the seller to repay it if:
 1. The forfeiture clause must be of a penal nature – the sum forfeited must be out of all
proportion to the damage
 2. It must be unconscionable (unfair) for the seller to retain the money
PROF: no idea what this means; will end up being subjective opinion of judge in less
obvious examples
 This equity of restitution is to be tested, not at the time of the contract, but by the conditions existing when
it is invoked
 PROF: solicitors keep putting more into contracts to be more descriptive, but are using labels which the
court has said it will continue to analyse despite using that term – DON’T JUST RELY ON LABELS
Winley Investments Inc v Milore Sales Ltd (1991) BCSC (general principles of when deposit is forfeited)
 Whether or not a purchaser is entitled to return of a deposit depends upon the terms of the contract
o The general rule is that in the absence of an agreement to the contrary if the contract goes off by
the default of the purchaser, the deposit, being a guarantee of performance, becomes the property
of the vendor, even if he resells the land at an increased price
 Here the plain wording of the contract overrides the general rule
o The vendor has not elected to terminate the contract and consequently the deposit is not forfeited
to the vendor on account of damages
 General rule: forfeited to vendor unless contrary intention
INTERIM PERIOD


Paying deposit is first step in interim period of the contract
o Payment of deposit is pretty fundamental to continued existence of contract – if not paid you
usually see contract end
If there are conditions that hold contract in suspension – there may be two deposit payments
o 1. Initial payment that is lower amount to show you are serious about entering agreement
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2. When conditions fulfilled there will be increased deposit to be paid
RELATIONSHIP BETWEEN VENDOR/PURCHASER
Lysaght v Edwards (1875) Eng
 The moment you have a valid contract for sale the V becomes in equity a trustee for the P of the estate
sold and the beneficial ownership passes to the P
o The V having a right to the purchase money, a charge or lien on the estate for the security of
that purchase money and a right to retain possession of the estate until the purchase money is
paid – in the absence of an express contract as to the time of delivering possession
Rich v Krause (1975) BCSC
 Application for an order vesting title in the property to P
 To succeed P had to establish:
o That the V was holding the property in trust for the P
o That the V could not be found
UNPAID PRICE (VENDORS LIEN)
 Claim V has against P: Vendor’s Lien
o Only thing V has a right to once beneficial ownership transfers to P is the money
o P has a right to property and V has a right to money
o V has a lien against beneficial ownership of P for the money - ie. if title got transferred without V
getting money the V would have a lien that it could register against P’s title
 Can’t be registered until title transfers – land title system doesn’t recognize beneficial
ownership
RISK
Martin Commercial Fueling Inc v Virtanen (1997) BCCA
Issue: what is the nature of the interest, if any, acquired by a person who has contracted to purchase land, but
who has not yet completed that purchase?
 Judgment holder (against V) trying to force sale to realize on his judgment:
o P executed contract to buy land before judgment registered on title
o Should have checked so they could have avoided this issue
o Court says Lysaght is good law – beneficial ownership transferred to P when contract was
enforceable
 P acquired land before judgment registered
o To the creditor – nemo dat; they can’t get an interest that the V didn’t have to give
 Beneficial ownership passes to P where: there is a valid contract that equity would enforce against the
conscience of the person who signed the document
CONDITIONS

Condition – term of the contract which provides that a party or parties obligations are dependent on some
future event, circumstance or decision
o Nothing else can happen until conditions are fulfilled
o If condition is too ambiguous and can’t be fulfilled – contract can’t be fulfilled
o PROF: good idea to have separate consideration for V’s obligation to remain tied to the contract
while conditions are outstanding
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





Theory that if condition fails you still have this agreement to look to that says you paid for
this to be an option because there was separate consideration
True Condition Precedent – one that neither party can fulfill; happens before closing; something a third
party outside the contract has all the power to fulfill
Closing Condition – won’t close until condition is fulfilled
Purpose of condition: holds contract as enforceable agreement but an event has to happen before main
obligation to transfer occurs
Creates an obligation to try to do something to make condition occur
There is risk in a contract with conditions – because you are creating additional obligations that the parties
could use to interpret against each other
Turney v Zhilka (1959) SCC [property couldn’t be annexed to Village of Streetsville]
 True condition precedent = an external condition upon which the existence of the obligation depends
o Until the event occurs there is no right to performance on either side – there is no right to waive or
enforce
o The parties haven’t promised that it will occur – without that promise, there can’t be a breach of
contract until the event does occur
 A true CP can’t be waived by either party without express reservation of a power of waiver
o If condition isn’t for your benefit you can’t waive it
 Decision whether to annex was subjective decision of Village – therefore no way this could be enforceable
Dynamic Transport Ltd v OK Detailing Ltd (1978) SCC
 The court will readily imply a promise on the part of each party to do all that is necessary to secure
performance of the contract
 Court looked at the legislation for subdividing (Planning Act):
o Person who purports to carry out subdivision shall apply for approval in manner described in
regulations – court sees this provision as implying a duty to make the application
 V as person purporting to subdivide has obligation to make application
 No obligation to GET subdivision – just obligation to APPLY
 Court puts an obligation on one of the parties – also implies a standard of conduct
o This standard limits the discretion available to V in pursuing the condition – if full discretion they
would have choice whether to apply
o Court says they don’t have full discretion – have to apply and has to pursue subdivision with due
diligence
Wiebe v Bobsien (1984) BCSC
Facts: guy selling house and entered into agreement that made the sale of house subject to the sale of potential
purchaser's house. There was date by which P had to be able to sell its house. V then purports to cancel
agreement with P, before the condition date. P ends up selling their home before the condition date, so was
able to fulfill the condition. P sues for specific performance - condition fulfilled so you should sell me the house.
 A condition precedent may be of a nature that creates no binding agreement or it may just act as an
ingredient which suspends performance of an otherwise complete contract
o It all depends on the intention of the parties as expressed in the contract itself and as shown by
surrounding events
 In a real estate transaction a condition precedent which must be performed by the P will not usually prevent
the formation of a contract but will simply suspend the covenant of the V to complete until the condition
precedent is met by the P
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Court considered that there was an intent to hold contract in suspension and P had used best efforts to
fulfill condition
o Court should give meaning to those intentions
o When P sold home (fulfilled condition) the V was contractually bound to sell; had no legal right to
cancel the contract
DISSENT: Lambert started formulating the condition continuum discussed in Griffen
o Thought that P had too much discretion (could reject/accept any offer on his home) – too subjective
in favour of P and therefore the terms to fulfill the condition are too uncertain and can’t be enforced
Griffen v Martens (1978) BCCA
LAMBERT (dissent in Wiebe) IS MAJORITY HERE
Facts: purchase and sale subject to purchaser obtaining financing that is satisfactory to it
 If the condition has an ascertainable meaning – the court should strive to find it (give effect to the contract if
you can)
 Court: there are 4 possible interpretations of this phrase:
o 1. Satisfactory to reasonable person about which nothing else is known (completely objective)
o 2. Satisfactory to reasonable person in the objective circumstances of the P (hybrid condition)
o 3. Satisfactory to reasonable person with all the subjective but reasonable standards of a particular
P (hybrid condition)
o 4. Satisfactory to particular P with all quirks and prejudices but acting honestly – at the whim of the
P (completely subjective)
 If no guidance/standard for how P exercises the condition – it falls within either one of the extremes (1 or 4)
= condition (and contract) fails
 If there is a standard for exercising the discretion – will be a hybrid condition (2 or 3) = court is more likely to
try to find a way to make the condition and the contract effective
 Held: The interim agreement was not void for uncertainty – the subject clause must be interpreted on the
basis that the P was to use his best efforts to obtain financing that was satisfactory to him, and he was not
to withhold his satisfaction unreasonably
o PROF: it’s all about discretion – how free is P to say yes or no to potential financing
WAIVER OR SATISFACTION
 If the condition is not for your benefit you can’t waive it (Turney)
 Equitable rule that the party who has the benefit of a condition can waive it (Law and Equity Act s 54) if:
o 1. CP benefits only the person waiving it
o 2. Contract is capable of being performed without fulfillment of CP (financing is not an essential
term – therefore can perform contract if financing condition can’t be fulfilled) AND
o 3. Where time for fulfillment of CP is stipulated – waiver before that time; if no time stipulated –
waiver within reasonable time
o If all three are fulfilled – party can waiver condition and parties are bound to fulfill the contract
Kitsilano Enterprises Ltd v G&A Developments Ltd (1990) BCSC
Facts: building being purchased. K subject to a few conditions:
1. Review of leases, contracts and plans to sole satisfaction of P
2. Subject to inspection to sole satisfaction of P
3. Subject to financing on terms satisfactory to the P
 Court decided that sole satisfaction of P creates too much discretion for P – looks too subjective
o PROF: thinks they got it wrong here – doesn’t think sole satisfaction means any way P wants
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Tau Holdings Ltd v Alderbridge Development Corp (1991) BCCA (looked like it was subjective but wasn’t)
 Where agreement expressly provides that once accepted it can’t continue as an offer – in face of this
express term, principle that an interim agreement with an entirely subjective CP is merely an offer can’t
apply
o The parties by their agreement have expressly provided otherwise
 “time of the essence” clause = breach of a term of the agreement requiring something to be done by a
certain time is to be considered, by agreement of the parties, to be a fundamental breach
ABORIGINAL TITLE
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Fact that there may be an AB title claim over property is an encumbrance of impingement on your
ownership rights
Aboriginal title is a product of the use and occupancy of land by First Nations
o First Nations themselves have no concept of land title - their relationship with land is to be used for
hunting, gathering, supporting people and living
o In our society these uses collide with our idea of ownership of the land - that we can alienate others
from having access, use or ownership
Reserves - don't really own the reserve, Crown retains ownership and FN given rights of use
In 1982 Constitution enshrined the existing Aboriginal rights (s 35) - did not create any new rights
o This makes it difficult, if not impossible to extinguish any existing rights
This is the effect of what court cases now are doing - we cannot extinguish existing rights (which exist for
use and occupation of land, established by historical evidence) and Crown can't just get in the way of those
and take them away
Sparrow - right to fish, hunting
Delgamuuk - fight about a communal right to a certain area of land
 Where first introduction of idea of Aboriginal title started
 Communal right to land could only be surrendered to federal Crown - they were only one with jurisdiction
over FN
 Land could not be used in a way that is irreconcilable with the AB right - this would be an infringement of
the AB right
o Infringement can happen if it is justified
o Grounds for justification - compelling and substantive object and you must consult with the FN that
is affected in order to compensate them
o Obligation to comply with conditions of infringement is on the Crown - not on private parties
 Attempts have been made to explain what the "consultation" is to mean
o Courts have said that it depends on how serious the infringement is and on what the right is that's
being infringed
o Another determining factor is the strength of the claim of the FN over the land it is claiming rights
over
 Big issue in Delgamuuk is how to measure that claim - usually maintained by traditions, oral histories became huge evidentiary issue for court
 Accommodation (one of conditions of infringement) usually takes form of money
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Starting to get better - where Crown intending to give use for industry, while it remains Crown obligation to
consult with FN, the Crown will involve industry (whoever user of land will be) to provide for some of the
compensation
o Could be money, jobs, improvements to community
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Cases in last 15 years have stopped short of granting a AB title to land in the way we might think of it as
ownership
o SCC has said it is something between fee simple and a personal use right
In general world - personal right of use isn't an interest in land, it is something less than that, it is a
contractual right that you can enforce (like a license)
o In AB land claims FN are enforcing a personal right
WARRANTIES/REPRESENTATIONS
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Condition: something that goes to the root of the contract – if untrue gives right to rescind
Warranty: doesn’t go to root of contract; may express some lesser obligation of parties – usually only gives
rise to damages claim
When thinking about whether rep or warranty gives right to terminate:
o Is it a vital fact or collateral issue?
o Is the matter of such importance that the party would not have entered into contract unless
ensured of strict or substantial performance of the promise
FINANCING THE PURCHASE
MORTGAGES
Two characteristics of mortgages:
1. Has element of personal covenant to repay a loan (contractual part)
2. Conveyance of land for security for that loan
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Originally – mortgages were a transfer of the land to the lender
o Lender owned the land until repaid
o Arrangement was contractual – promise to repay and promise to return land
Equity stepped in to provide that:
o Even if borrower had transferred land to lender – the borrower gets to stay in possession
o Imposed the right of redemption – even if borrower loses contractual right to get land back, equity
will still give you a right to redeem
 Even outside of the contractual period you have this right – courts of equity will enforce it
Equity of redemption: has become an interest in land of itself
o Borrower owns this right – can sell, transfer or further mortgage it
o The interest is less than fee simple; but still an interest in land
o Cannot contract out of the equity of redemption
o It can be extinguished or lost by:
 Lapse of time
 Foreclosure
 Sale of land to a third party
o Seen as so important that it can’t be overwritten by any contractual term
 “Power of sale” – all mortgages in Canada have power of sale term which says that if
borrower defaults, lender can sell land to realize on its loan
 In BC this right isn’t allowed to override equity of redemption
 To exercise the power of sale you have to go to the courts – judge will tell you how
long the redemption is and when the lender can actually exercise the power of sale
 Standard redemption period is 6 mos (from date of court order; not default)
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In BC – potential conflict between historical view of mortgage and Modified Torrens version:
o Mortgage is reflected as a charge on title – not as a transfer of land (as it historically was)
o Land Title Act s 231 – a mortgage is a charge; less than a fee simple ownership in land
 Also says no principle of law about mortgages is done away with
 Nothing precludes a mortgage from containing words which purport to transfer the land
 Regardless of words in mortgage – BC courts have continued to treat a mortgage as a charge
North Vancouver (District) v Carlisle
 Borrower argued that a mortgage doesn’t transfer the legal estate to the mortgagee but merely creates a
charge upon it in his favour
o This specific mortgage contained words of transfer
 Court held that “the mortgage in question does convey it to the mortgagee”
 PROF: this helps define what a mortgage is
o A mortgage is a contract that is sufficient to transfer the legal estate of land as security for a loan
which is redeemable on payment of the debt
ELEMENTS OF A MORTGAGE
LEGAL MORTGAGE
 A mortgage consists of two parts [LTA s 255]:
o 1. Form B (two page form with essential elements: lender, borrower, principal amount, interest
rate, due dates)
o 2. Contract for the terms of the mortgage
 Three types of terms:
 1. Prescribed terms – PROF: these are simple, ok, not great
 2. Standard terms – most banks, financial institutions, law firms have drafted standard terms
 File those standard terms with LTO and can then refer to them by serial number
 If you use standard terms must provide a copy to the borrower – otherwise
prescribed terms will govern [LTA s 229] *consumer protection measure*
 You can modify the standard terms
 3. Express terms – terms that are unique or specific to the transaction
o Attach terms (as Part 2) to Form B (as Part 1) and file together
Conventional Mortgages: mortgage for a principal amount that is less than 75% of the value of the property
Bank Act imposes 75% limit on financial institutions taking mortgages on property
Right now in current economic conditions banks won’t even go over 50% principal
High Ratio Mortgages: bank gives 75% down and then insurance company (CMHC) provides insurance for the
amount that is over 75%
If you default and bank can only sell property for 75% of value – CMHC will pay them the rest of their
loan – you pay a fee for this
EQUITABLE MORTGAGE
 Equity has been heavily involved in mortgages historically
 Split between legal and beneficial title
o Legal title = registered title
o Beneficial title = can be dealt with outside the land title system
o Torrens land title system doesn’t recognize split in title – presumes that registered owner owns both
legal and beneficial title
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Beneficial owner = equitable owner
o Has benefit of equity in the property (it is the greater interest in the land)
o Equitable interest can be sold, transferred or mortgaged
Equitable mortgage = mortgage on equitable interest
o Creates a charge on the property but is not sufficient to pass legal estate
o Can be created on a number of different interests:
 1. Mortgage on equitable or future interest (ex. right of redemption)
 2. Instrument or agreement that is not sufficient to convey a legal estate (ex. agreement
that couldn’t be registered in LTO but by which you promise that you will execute a
mortgage)
 3. By deposit of duplicate certificate of title
Duplicate certificate of title – certificate that is absolute evidence of your ownership of title
o Taking it out of the LTO locks title – can’t create another mortgage, transfer title, etc.
o Can cancel a DCT but it is very difficult and time consuming
o Giving DCT to lender gives them control over your title
Negative of equitable mortgages – lender is no longer a secured creditor
Royal Bank of Canada v Mesa Estates Ltd
Facts: RBC has DCT; arguing that because they have equitable mortgage they should get some priority – ie. that
equitable mortgage should take above other judgment creditors
PROF: even equitable mortgages attract all the remedies that historically mortgages received
 In BC there is no presumption that deposit of DCT shows an intention to create an equitable mortgage
 Deposit of duplicate indefeasible title with a bank could be for one of three purposes:
o 1. Safekeeping
o 2. As security for an undertaking not to sell or mortgage the land until an obligation to the bank is
discharged or released [see ss 183, 185, 191]
 To sell transfer/mortgage land the duplicate indefeasible title must be provided to the LTO –
by giving it to the bank the owner is putting it out of his power to comply with the LTA for
granting a transfer or mortgage of the land
o 3. To charge the land in favour of the bank – by way of equitable mortgage
 Which of these three options applies depends on what the parties intend
o Here court couldn’t find anything to show intention to create a mortgage – looked at: no clear
words of mortgage, no use of terms like foreclosure, not even a certain principal amount, not even
evidence that a legal mortgage was asked for by the bank
North West Trust Co v West [Alberta]
 Issue: whether a lodgement of title agreement accompanying deposit of a duplicate certificate of title by a
debtor with his creditor displaces any presumption/inference of an equitable mortgage arising from that
deposit
 Mesa Estates should not be followed in Alberta
 Courts can draw “inference” that parties intended to create equitable mortgage where duplicate
certificate of title deposited with creditor
o Deposit of DCT merely raises an inference which must be weighed against all other circumstances of
the transaction (not a firm presumption requiring significant contrary evidence to disprove)
o Whether a particular transaction gives rise to an equitable mortgage must depend on the intention
of the parties ascertained from what they have done in the then existing circumstances – intention
may be expressed or inferred
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COMMON ELEMENTS
 Redemption – a right possessed by the mortgagor upon payment of the mortgage to retain legal title to the
property
o This equity of redemption is an estate in land and the person entitled to it is in equity the owner of
the land
o Fundamental to idea of a mortgage - can’t be a mortgage without ability of the borrower to redeem
o Right of redemption arises on entering into mortgage; but can’t enforce until contractual rights in
the mortgage have expired
o Can’t be contracted out of
o Redemption has to be free from conditions
 Only condition is that you pay the money owed on the mortgage
 Cannot take what might be seen as collateral advantage in a mortgage unless:
o That collateral idea is not unfair or unconscionable
o That the collateral advantage is not a clog on redemption (doesn’t prevent redemption)
o That it is not inconsistent with the right of redemption
o ie. lender can ask for things that may not be directly related to the loan - if it fits into one of these
three categories
Knightsbridge Estates Trust Ltd v Byrne
Argument: postponement of contractual right to redeem for 40 years was void in itself because it was an
“unreasonable” period by reason merely of its length (arguing this is a clog on redemption)
 Court: you can have a long term mortgage but the right of redemption can’t be illusory
o Held that 40 years was too long = illusory right of redemption
 Right of redemption is a necessary element in a mortgage transaction – where the contractual right of
redemption is illusory, equity will grant relief by allowing redemption
 Equity may give relief against contractual terms in a mortgage if they are oppressive or unconscionable
o Deciding if a transaction falls into this category – can consider the length of time for which the
contractual right to redeem is postponed
STRUCTURE OF MORTGAGE
 Mortgages have been around so long that they have been given special rules of interpretation and
enforcement – some rules codified in statute
 Where mortgage is made pursuant to the Land Transfer Form Act – allows for use of standardized short
form which represents much more detailed terms
o Means that there are implied covenants, warranties, etc. that are brought into the mortgage by
virtue of the Land Transfer Form Act
o These implied terms only come in where the mortgage is made pursuant to the LTFA
STATUTORY PROTECTIONS AND PROVISIONS THAT APPLY TO MORTGAGES
PROVINCIAL
 Provincial statutes aren’t directly applicable to banks (they are incorporated federally under the Bank Act)
o Banks will try to comply with provinces but if there are major differences they will ignore them
o Consumer protection statutes are usually similar so banks will usually comply with them – but they
don’t necessarily have to
 Credit unions (created under provincial statute) and private lenders MUST comply with provincial legislation
Mortgage Brokers Act Part 2
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All fees and charges have to be disclosed to the borrower by the lender [Mortgage Brokers Act s 17.3???]
o Includes interest, professional fees, appraisal fees, any other fees and charges
o Requires mortgage brokers to disclose all costs of the loan – including any fee the lender may be
paying to the mortgage broker
Borrower is given a 48 hour “cooling off period” after receiving disclosure from lender – during which it can
rescind the mortgage [Mortgage Brokers Act s 16(3)]
o Lenders should be careful about when they give money to borrower – if before the 48 hours and
borrower rescinds, lender has no security in land to claim against; must rely on personal covenant
Supreme Court has power to review non-compliance with these terms [Mortgage Brokers Act s 17]
o One remedy – allow borrower to redeem the mortgage within 1 month of it being granted; even if
mortgage prohibits redemption
Business Practices and Consumer Protection Act Part 5
 The BPCPA applies to situations where credit is advanced – includes mortgages
 The mortgage is security for a credit agreement between borrower and lender
o The credit agreement creates the obligation to repay; mortgage is securing that obligation against
the land
o PROF: the mortgage itself doesn’t create anything – it is not a loan agreement; just evidence of the
debt; must have an agreement that creates the loan that the mortgage secures
 BPCPA protects consumers from unconscionable practices
o Mostly concerned with non-disclosure of costs or fees that are hidden in the loan and the borrower
wouldn’t be able to determine on its own
 On granting credit agreement the creditor must provide borrower with a disclosures statement in writing,
that contains the information required by statute and prominently displays that information in a clear and
comprehensible manner that the borrower can understand [BCPCA ss 66(3), 67]
o Means that - every fee, charge or expense that is not part of the debt has been disclosed
o This disclosure must be provided before entering into the mortgage [BCPCA s 66(3)(a), (b)]
 Statute prohibits unconscionable acts of creditors against debtors - allows court to review whether
unconscionable act has been inflicted on debtor [BCPCA s 8]
o BCPCA s 8(3) – contains examples of what is considered unconscionable (broadly defined in order to
protect consumers)
 Burden of proof to show that unconscionable act wasn’t committed is on the creditor [BCPCA s 9]
 Remedies the court can use [BCPCA s 10]:
o Revisit the transaction (undo it)
o Require an accounting (require lender to provide details about how things are being calculated)
o Order full repayment from either side
o Set aside entire transaction
FEDERAL
Interest Act s 10
 For mortgage or credit contract secured on real property – if the term of the mortgage is 5 years or more,
after the fifth anniversary the borrower is free to repay the mortgage without any penalty provided they pay
three months interest [s 10(1)]
o Interest Act gives every borrower the opportunity to repay at the end of 5 years (with only penalty
incurred being charge for 3 mos interest)
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o
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Because this arises out of equity – if you waited too long to claim under this section you might be
barred from using the provision
This section does not apply to corporations [s 10(2)]
o Really it’s meant to protect individuals
o Gap in the legislation that allows this section to apply to partnerships, limited liability corporations is
going to be eliminated soon
Potash v Royal Trust Co
Issue: (1) when may a mortgagor prepay a mortgage pursuant to the statute?
(2) may a mortgagor contract out of or waive the prepayment right granted by the statute?
(3) by the renewals, did this borrower actually contract out of Interest Act s 10?
 Purpose of s 10 is to ensure mortgagors have the right to pay off their mortgages at the end of each fiveyear period - They can’t be “locked in” for more than 5 years
o Where the original term of the mortgage exceeds 5 years, the mortgagor has the right to pay it off at
the end of 5 years in compliance with the section
o Where the original term of the mortgage is for 5 years or less and the term is extended by
agreement beyond the 5 year period (the “date of the mortgage” remaining unchanged) the
mortgagor has the right to pay it off at the end of 5 years [renewal is not presumed to reset the
mortgage date – must have language in renewal which resets it]
o Where a mortgagor elects not to exercise his right under s 10 but instead enters into an otherwise
valid and enforceable renewal agreement which “deems” the date of the original mortgage to be
the date of maturity of the existing loan, and the term of the renewal agreement doesn’t itself
exceed 5 years, he can’t pay off the mortgage until the end of the 5 year renewal period
 Court considers that: if the bank had to consider a renewal a new mortgage, if another charge was
registered in the time in between, the lender would lose priority of claim
o Lender would have to spend time and money to keep priority
o These costs would then put added expense and pressure on borrowers
o If court forced idea that renewal = new mortgage this would create more burden on borrowers
 Dual nature of the mortgage can be split: the personal contract part can be reset with the security over
land being released
o The security over land continues through renewal; contract promise to repay is reset (this is a new
agreement for personal covenant)
 This section was enacted in the public interest and therefore the mortgagor can’t contract out or waive
this statutory protection
 When a mortgagor makes a conscious decision on the basis of full knowledge of his statutory right to repay
at the end of the five-year period not to do so, he doesn’t contract out of or waive his statutory right
o He simply doesn’t exercise it
o If he purports in a mortgage or renewal agreement to relinquish his right to pay off the mortgage at
the end of any given 5 year period, such a provision could not be enforced against him at the
instance of the mortgagee
 He would still be free to pay off the mortgage on compliance with the statute
Interest Act s 6
 Applies to mortgages on real property where the interest is payable by one of three methods:
o 1. Sinking fund plan – every time you make a payment the fund goes down
o 2. Blended interest and principal – part of payment goes to interest first, then rest to principal
o 3. Stipulated repayments – schedule of interest that applies to specific payments
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These methods of calculating are deceptive, therefore consumer protection requires provision of statement
of what the true interest rate is that would be payable if that interest was calculated yearly or half yearly,
not in advance (if calculated after payment)
If the lender doesn’t comply with this section – they may get NO INTEREST (this is a huge penalty)
Banks comply by providing:
o Direct statement in mortgage saying stated interest rate is x%, interest calculated yearly/half yearly
is y%
o Chart which sets out rates and what corresponding true rate would be
o Formula they put in the mortgage – allows you to figure out yourself what true interest rate is
Interest Act s 8
 Any provision in the mortgage that has the effect of raising interest rate on money in arrears after maturity
date is prohibited [s 8(1)]
 In arrears (provision triggered if interest rate increase occurs after one of these events):
o Money that is not repaid on maturity date – after that date that money is in arrears
o If you breach and bank demands repayment – the principal amount is now in arrears
o If you breach and bank doesn’t demand repayment – only the monthly amount owed is in arrears
 Not always the entire principal amount that will be in arrears
o If you don’t make a monthly payment – the only money in arrears is that monthly payment amount
(unless bank demands principal)
o Interest rate can’t be increased on this portion either
 Paying a penalty has the effect of increasing interest rate – therefore not allowed
 If the bank tries to get around this by putting the default rate in the credit agreement (not the mortgage)
they can, but can’t use the mortgage to secure or enforce this default rate
Re: Weirdale Investments Ltd v CIBC (1981) Ont High Court Justice
Facts: interest rate for the term was 10%; if the mortgage paid off on maturity then all interest would be
forgiven (effective rate of 0% for term); if mortgage not paid off then the interest rate would remain at 10%
 Court – this has the effect of charging a higher interest rate on arrears; therefore lender doesn’t get any
interest
 Interest Act s 8 – focuses on the maximum charge that can be exacted from a borrower on arrears of
principal or interest, by limiting it to the rate of interest payable on principal not in arrears
o A charge whether called or found to be a fine or penalty or rate of interest which exceeds this limit
is precluded
 It is the effect of the fine/interest provision with which the section is concerned
Raintree Financial Ltd v Bell (1993) Supreme Court
Lender argues: because interest rate increase takes effect before date for redemption, and irrespective of
whether or not the mortgage was in default, there is nothing to offend Interest Act s 8.
Master’s Decision:
 The clause offends the Act by having “the effect of increasing the charge on the arrears beyond the rate of
interest payable on principal money not in arrears.”
Judge’s Decision on Appeal:
 The increase in interest which comes into effect, in this case, a week before redemption, increases the
interest payable on both the principal not in arrears and that portion in arrears after September 24th
o There is no increase in the interest rate triggered by a default or arrears
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o
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Have to look for trigger – if default/maturity resulting in money in arrears isn’t the trigger then
interest rate increase is allowed
s 8(2) provides that so long as the rate of interest on arrears is not greater than the rate of interest on
principal money not in arrears, the provision is not prohibited
The motivation of the drafter is irrelevant – either the contract violates or doesn’t violate s 8 of the Interest
Act – in this case it does not
Criminal Interest Rate (Criminal Code ss 347, 347.1)
 Two part offence:
o 1. To enter into an agreement for criminal interest
o 2. Or to receive criminal interest
 “interest” – anything you are required to pay to get the loan; includes: charges, expenses, fees, fines,
penalties, commission, etc.
 “criminal rate” – effective annual interest rate that exceeds 60% per annum
o Requires you to look at amount advanced, interest payable and time over which it is payable
o Annual Effective Rate = Aggregate Credit Advanced x Aggregate Interest
Time for Repayment
 Aggregate interest = all fees, fines, interest, etc. paid
 Aggregate credit advanced = all you borrow or could borrow
 Time for repayment = time you have to repay
*If the interest rate is at a criminal rate – the court can reduce it*
Garland v Consumers’ Gas (1998) SCC
Facts: Late penalty payment (LPP) for customers who don’t pay their gas bill by the due date. LPP calculated at
5% of unpaid charges for that month. LPP is a one-time penalty which doesn’t compound or increase over time.
If customer pays their bill very soon after the due date the penalty gives rise to an interest rate exceeding 60%
per annum (“criminal interest rate”).
 For purpose of s 347, “interest” is an extremely comprehensive term which expressly includes charges or
expenses “in the form of a ... penalty.”
o To constitute “interest” under s 347 – a charge must be paid or payable for the advancing of credit
under an agreement or arrangement
o Under s 347(2) – “credit advanced” can include the value of any goods, services or benefits which
may be so advanced
 347(1)(a) – makes it illegal to enter into an agreement/arrangement to receive interest at a criminal rate
 Should be narrowly construed – whether an agreement or arrangement for credit violates
the provision is determined as of the time the transaction is entered into
 If the agreement or arrangement permits the payment of interest at a criminal rate but
doesn’t require it – there is no violation of 347(1)(a), but 347(1)(b) might be engaged
 347(1)(b) – makes it illegal to receive a payment or partial payment of interest at a criminal rate
 Should be broadly construed – whether an interest payment violates the provision is
determined as of the time the payment is received
 The effective annual rate of interest arising from a payment is calculated over the period
during which credit is actually outstanding
 There is no violation of 347(1)(b) where a payment of interest at a criminal rate arises from
a voluntary act of the debtor – ie. an act wholly within the control of the debtor and not
compelled by the lender or by the occurrence of a determining event set out in the
agreement
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A penalty is not “voluntary” simply because it could be avoided through prompt payment – when a penalty
is specified in an agreement or arrangement for credit, the lender bears the risk that the payment of that
penalty might give rise to a violation of s 347(1)(b)
Nelson v CTC Mortgage Corporation (1984) BCCA
 “effective annual rate of interest” – is to be calculated over the term of the mortgage
o The interest should be determined by the terms of the document and not by the act of the borrower
in paying off the mortgage
 The exercise of an option by a borrower doesn’t fall within s 347(1)(a) or (b)
 An agreement or arrangement for credit which is legal on its face can’t become illegal under s 347 through
the voluntary act of the debtor
ENFORCEMENT
ASSIGNMENT OF MORTGAGE
 Mortgage is like any other property interest – you can do things with it
o Historically a borrower couldn’t transfer their debt; equity modified this (Law and Equity Act s 36 –
debtor can assign debt) – after transfer it becomes new holder’s obligation to pay lender
 Requirements under Law and Equity Act s 36:
 In writing
 Absolute assignment – full debt, not a portion
 Notice given to lender
 Lender can give away its ownership of the mortgage to anyone – no limitation on this (this is a transfer
permitted under our land title system)
 Priority agreements: priority of claims based on date/time of registration unless parties express contrary
intention to this
o If owners of charges have agreement between them to change priority of charges
o Can register a priority agreement so there is notice in the LTO
Property Law Act (provisions that deal with transfer of mortgage)
 s 21 – in an instrument transferring land subject to a mortgage there is an implied covenant that transferee
will make payments under the mortgage and will indemnify transferor for any liability under mortgage
o section is really to protect the transferor
 s 22 – lender has right to take action against the current owner of the fee simple subject to mortgage
o if you sell land subject to mortgage – lender can enforce mortgage against new owner
 s 23 – where land transferred subject to mortgage, transferor stops being liable under the mortgage unless
the lender gives them within 3 mos of the expiry of the mortgage
o if you sell land subject to a mortgage, at the end of the term of the mortgage the vendor is free from
any liability under the mortgage unless the lender gives notice that they are still liable (within 3 mos)
o section is to protect the lender
o only applies to residential land
o emphasizes dual nature of the mortgage – security of land is gone (sold); personal covenant
continues until mortgage expires
 s 24 – for residential land transferred subject to mortgage – if lender approves the transferee then
transferor is free from the personal covenants in the mortgage
 s 31 – consolidation of mortgages; where lender grants multiple mortgages on different properties if one
loan goes bad they can enforce them all
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can be contracted out of – borrower can insist lender doesn’t have right to consolidate
LIENS
 Some liens can be registered on title:
o Builders Lien Act – allows unpaid workers/suppliers to register lien against property where there is
construction
o Court Order Enforcement Act – allows judgment creditors to file judgments against properties
owned by judgment debtors
o Strata Property Act – allows strata corporations to file liens for unpaid fines or other strata fees
 Other statutes create liens that may or may not be registered and can affect priority of claim against land:
o Employment Standards Act – liens for unpaid workers
o Workers Compensation Act – liens for unpaid assessments for WCB
o Family Relations Act – if there is triggering event under FRA it immediately creates lien for spouse
that is not registered as owner on title
o Lease for less than 3 years where tenant is in possession [LTA s 23(2)(d)]
MORTGAGE DEFAULT SITUATION
 In default situation the lender has two options:
o 1. Sue for repayment on personal covenant – by statement of claim
o 2. Foreclose on the security – by petition
 Foreclosure: if borrower has granted a mortgage the only right they still have is the right of redemption;
foreclosure is an equitable action that ends the borrower’s right to redeem the property
 In BC must start foreclosure by petition – in other provinces don’t necessarily have to go to court, often have
power of sale in the contract [governed by Supreme Court Rules Rule 21-7]
o In BC every time a lender tries to exercise power of sale and borrower raises an objection the court
will step in and raise their right to oversee the sale
 In court the lender will ask for an order nisi; in this order they want:
o Declaration that the mortgage is in breach
o Declaration that money is owed (and amount owed)
o Declaration of court as to length of redemption period – length of time they have to wait to sell
 In BC presumption is 6 mos
 Interest is still accumulating during those 6 mos
 Court has the discretion to reduce redemption period – usually do this where lender’s
security is at risk (ex. if house is valued much lower than outstanding value of loan)
 At the end of the redemption period the lender can ask for:
o 1. Order absolute
 Transfers or vests title of the land to the lender
 If granted, this extinguishes personal covenant of the borrower [PLA s 32] (if bank takes title
and land isn’t worth value of loan – they can’t go against borrower for remainder)
o 2. Order for sale (more common than order absolute)
 Lender gets right and ability to list for sale, accept offers, bring offers to court to close (court
supervises this sale process)
 Personal covenant still exists here – if sale doesn’t meet loan value, can go after borrower
 For both orders – when sale is going to happen the court will make a vesting order (in lender for order
absolute; in purchaser for order for sale)
o Vesting order is the final order – it changes title
 It also clears title for everything below the mortgage that is subject of the action
 First mortgagee gets paid out and remaining money flows down to lower charges
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 Judgment holders take rateably [Court Order Enforcement Act]
*Second mortgage is a mortgage of the right to redeem – so at any time second mortgage lender could pay out
first mortgage and take that position*
DEFAULTS
TITLE
VENDOR’S OBLIGATION
 Main action V will have to do – deal with the title and get it into the state that the contract requires
Property Law Act
 Deliver registrable instrument that allows title of purchaser to be registered in the LTO (Form A) [s 4]
 Deliver registrable transfer to transferee; and if landlord, registrable lease to tenant (for leases longer than 3
years) – if don’t want lease registered must include clause in lease agreement stating it won’t be registered
[s 5]
 V must register its own title before it transfers title [s 6]
o If V purports to transfer but isn’t actually registered owner there is no privity between contract
party and actual registered owner
o Where commercial properties held in trust arrangement – just ensure that all parties with an
interest in the land are parties to the contract (prevents beneficial owner from having to register
and incurring the associated costs)
 Must adequately describe the land in order to transfer it [s 7]; use legal description
o You can’t provide a registrable title for land that doesn’t exist as a separate parcel
 These Property Law Act requirements are easily complied with by using a Form A transfer
o LTA s 185 – in order to register transfer you must use a Form A transfer
o LTA s 186 – when you use the Form A a bunch of covenants get implied into it (set out in Land
Transfer Form Act Schedule 2)
Land Transfer Form Act Schedule 2
Implies into Form A:
 Covenant for quiet possession – once you become registered owner through the transfer, there will be no
claims through the prior owner
o If third party says they have some right given by prior owner and it wasn’t registered in the LTO –
their claim is against the prior owner [results from LTFA Schedule 2 and LTA s 20]
 Covenant that title will be free from encumbrances – if documents for the transaction have no exceptions
to this; then when P takes title they are entitled to clear title
o If V doesn’t clear title before transfer to P; P will have claim either for default or damages
WHAT CONSTITUTES A TITLE DEFAULT
Re Hughes (1969) BCSC
[PROF: hates this case; messes with Torrens System principles]
Facts: “trifling” easement wasn’t enough for P to rescind contract
 V’s obligation to provide instrument that can transfer title – court said there was some obligation on P to at
least provide name to input (found that V had fulfilled this obligation
 V’s obligation to provide clear title – technically there is an easement so title isn’t clear
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
Court said: rescission is not available to P if the portion of land affected by the want of title is
comparatively trifling
o The easement is of no restrictive effect to normal use and enjoyment of the property and so is not
sufficient to entitle him to repudiate
o TEST used to determine if title defect was enough for P to get out of contract: whether the V is
conveying substantially what is required by the K
PROF: offended that courts are ignoring this basic principle of the Torrens System – that what is registered on
title is notice to the world and should affect everyone
Could lead to a V who covenants to give free and clear title – but doesn’t really have to if they give
“substantially” that
Caplan v Coles (1982) BCSC
Facts: case where Caplan is a lawyer and is trying to get something out of Coles; Coles is stupid and signs sale
agreement as himself but property is registered in company name: Jilco; Caplan refuses transfer from Jilco
 PLA s 6 says that V has to register its own title to give it to P – here the transferor in the contract was Coles
but Coles doesn’t have any title (Jilco is registered owner)
o Coles is not in compliance with s 6
 Comes down to what covenants you get out of V - All the covenants in the contract are with Coles
o Registered owner (Jilco) is the one giving Caplan the transfer form
o But the transfer form has implied covenants in it
o Therefore the implied covenants would be coming from a non-contract party; maybe a party that
the purchaser would have no claim over (no contractual claim)
 Court finds that the purchaser (Caplan) was free to reject this transfer
 In the absence of agreement, a V’s covenant to convey is satisfied only by a conveyance or transfer
executed by himself and not by a third party, as it is the V’s covenants and not those of a third party to
which the P is entitled
CONDITION OF PROPERTY/MISREPRESENTATION


The minute an enforceable agreement is formed the beneficial interest in the property transfers to the P
(Lysagth v Edwards) – results in risk also transferring to P
o This is reversed in contracts by setting out that the risk of the property is on the V
o Damage or destruction becomes V’s problem – if completely destroyed P probably has default
against V and can walk away from the transaction (because P is not getting what it contracted for)
Re Hughes – idea that a de minimus damage doesn’t give rise to right to rescind; does give right to claim for
damages for physical damage to property
PATENT/LATENT DEFECTS
Latent defect: defect NOT discoverable on reasonable inspection
Patent defect: defect that IS discoverable on reasonable inspection
Caveat emptor applies to patent defects
If you get reps and warranties from V about property condition that alters application of caveat emptor
Gronau v Schlamp Investments Ltd (1974) Man QB
Facts: apartment building with huge crack in foundation that vendor had covered up and knowingly sold to P
*Case turns on a battle of the facts*
 Patent Defects: discoverable by inspection and ordinary vigilance on the part of the P
o V is not required to bring attention to them – rule is caveat emptor
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o If P fails to observe patent defects on inspection he can’t complain about them later
Latent Defects: would not be revealed by any inquiry which a purchaser is in a position to make before
entering into the contract for purchase
o If actively concealed by V – caveat emptor doesn’t apply
o P can ask for rescission of contract and/or compensation for damages resulting therefrom
o Any active concealment by V of defects that would otherwise be patent is treated as fraudulent –
contract is voidable by P if he has been deceived thereby
Three preconditions on which a rescission can happen:
o 1. There was a warranty in the document
o 2. Fraud OR
 PROF: fraud has a very high threshold in the courts; hard to prove
 Fraud is proven when it is shown that a false representation has been made:
 Knowingly
 Without belief in its truth
 Recklessly whether it is true or false
 To find fraud court has to find absence of honest belief; onus of proving fraud is on the party
alleging fraud
o 3. Error in substantialibus
 Error or mistake that is so grave it goes to the root of the contract or a complete failure of
consideration
 where misdirection, although not fraud, is in a material and substantial point, so far
affecting the subject-matter of the contract that it may be reasonably assumed that, but for
the misdescription the P might never have entered into the contract at all
 In this case the contract is avoided altogether and P is not required to resort to
compensation
ERROR IN SUBSTANTIALIBUS
Hyrsky et al v Smith (1969) Ont HC
 Error in substantialibus – in equity a contract is subject to rescission if the parties suffered from a common
fundamental misapprehension as to the facts which went to the very root of the contract
o Here error was found – conveyance was actually only for half the intended land, and intention to
use for commercial purpose was known to V and mistake frustrated this purpose
 Where error in substantialibus is found it doesn’t necessarily = rescission of contract
o Qualification on rescission – is it possible to undo the contract (put parties back in original position)
 In circumstances where you can’t grant rescission – only damages will be available
TIME OF THE ESSENCE



Where “time is of the essence” – every time, date, or period limitation set out in the contract will be enforce
strictly
o Means strict adherence to time limits is a fundamental term
o Breach of time limits will give rise to non-breaching party being able to repudiate agreement
Time of the essence clause can be waived by parties: either expressly or by conduct
o Because the clause is so onerous – courts will be willing to relieve parties if conduct between them
makes it appear that time wasn’t considered important in the past
Two exceptions to ‘time of the essence’:
o 1. Express waiver
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o 2. If there are circumstances that make ‘time of the essence’ unjust or inequitable (Salama)
If time isn’t of the essence and the closing date passes, if you don’t want to be held to the contract the first
thing to do is write to other side saying you accept their repudiation
o Otherwise the contract is still alive since no one has terminated it
o If time is of the essence, the minute you miss that date the contract is dead
Salama Enterprises (1988) Inc v Grewal (1992) BCCA
*Another case that turns on the facts*
Facts: developer assembling parcels of land for development; needed corresponding closing dates; asked V to
delay completion to meet up with other dates, V agrees; P asks for delay again (of 1 day) and V refuses says
“time is of the essence” applies
 Extension of completion date is not an automatic waive of ‘time of the essence’
o Have to look at circumstances of this particular waiver – fact driven
o If it appears unjust to insist on ‘time of the essence’ then it can’t continue
 Here court considers: that V acted like it knew what P was doing (assembling parcels); V participated in
subdivision; extended completion once; extension was for a reasonable 1 day
o All of this considered together in light of V’s past behaviour – seems unfair to insist on strict
application of ‘time of the essence’ here
 Where time is of the essence of an agreement and there is an extension of time for performance of an
obligation under the agreement to a specified date, the effect of the extension on the essentiality of time
must be determined in the context of the circumstances of the case
o If there are circumstances which make it unjust or inequitable for a party to insist that time is of the
essence the court may refuse to give effect to this provision in the agreement
o In the absence of such circumstances the extension of time simply results in the substitution of a
later date for the one stipulated in the agreement – it doesn’t in any way affect the provision in the
agreement that time is of the essence
Ambassador Industries Ltd v Kastens (2001) BCSC
Facts: documents were delivered a day late because of fault of courier; purchasers did not even intend to
register the transfer on the completion date
 If closing date is extended and there wasn’t a specific statement that ‘time of the essence’ was to remain
in effect then it would not be enforced
o Unless you have specific notice that time is of the essence remains – it may not be enforced
 One party can’t unilaterally make time again of the essence by setting a new date for performance, without
giving express notice that if the new date is not met the party serving the notice will treat the contract as at
an end
 In this case “time of the essence” was waived when completion date was delayed
o Before the purchasers could again rely on the time of the essence provision they were required to
bring to the attention of the vendors that if the new date for completion was not met the
purchasers would treat the agreement as at an end
 There is jurisdiction in the court to refuse to enforce “time of the essence” provision where it would be
inequitable to enforce it (Salama)
Norfolk v Aikens (1989) BCCA
 Where neither party is ready and able to close according to the terms of the contract, time, although
expressed in the contract to be of the essence ceases to be
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Law and Equity Act s 31
Stipulations in contracts, as to time or otherwise, that aren’t deemed to be or to have become of the essence of
the contracts according to the rules of equity, must receive the same construction and effect as they would
receive in equity
THE COLLAPSING TRANSACTION
TENDER




Most common P breach that gives rise to V’s right to terminate contract – failure to pay purchase price
o Other obligations of P aren’t usually as fundamental; to give right to V to terminate
Tender: delivery of all documents, money, or any items required by the contract, to the other party in the
manner required by the contract
o Tender must be perfect
 P has to tender payment; V has to tender a registrable transfer, etc. (see above)
o Tender must be to the correct party
 If the contract says tender must be to the parties to the contract (ie. P/V) it must be to them
personally; can’t deliver to lawyers if it isn’t in the contract
 Should include in contract an authority of lawyers acting for the parties to accept and give
documents (to avoid this issue)
 Under the standard Purchase and Sale Agreement, lawyers have authority of undertakings
written into this form agreement [para 13, 14]; CBABC standard undertakings used
 PROF: even with express authority to use undertakings in the form agreement, lawyer
should discuss this with clients; they need to know risk in using undertakings because if
lawyer on other side doesn’t follow their undertakings and you haven’t explained to your
client – you are negligent
Results of tendering:
o 1. Affirms the contract – parties evidencing that the contract is alive and they are executing it
o 2. It is the best evidence of being ready, willing and able to complete the contract
 “ready, willing and able” is the threshold test for claiming specific performance
Where there is “anticipatory breach” – the party who has said they won’t close has up until closing day to
change their mind and close; they haven’t actually breached until the closing date and obligations arise
o Even then – it is only really a breach if time is of the essence and you don’t close at the time the
contract sets out
o If time is not of the essence the contract continues until one party repudiates – equity says that
contract will continue until a reasonable time after
o In sample contract Clause 11 requires tender by 4 pm on closing day – without this clause in the
agreement you can tender up until the last second (11:59:59 on closing day)
Norfolk v Aikens
Facts: V has common law spouse claiming interest under Family Relations Act; V can’t deliver clear title; P needs
vendor take-back mortgage to finance; P’s lawyer sends documents to V’s lawyer on undertakings process; this
process is not authorized in the contract; no process agreed on that they could use undertakings; clear title for
cash
 Where a party has taken an action that can be seen as an “anticipatory breach” (ex. saying they won’t close)
– you can start an action for specific performance even though the closing date hasn’t arrived yet (and the
party hasn’t technically breached yet)
Tender Issue:
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Tender is evidence of being ready, willing and able – but must be able to tender exactly as the contract
requires
o Here: neither party was ready, willing and able because they couldn’t tender what the contract
required – therefore both parties were in breach
Where both parties are in breach – neither side can rely on the breach of the other to terminate the
contract or require performance
o The agreement is still alive
o Court: if both were in breach one party should have sent notice to the other setting out new closing
date and making time of the essence
 At that new date whoever was ready, willing and able to close would have upper hand for
terminating or requiring performance
Court held there was no authority in the contract for the use of undertakings process to close
o If lawyers used this undertaking process without specific authorization from their clients they may
be negligent (Edward Wong Finance v Johnson)
REPUDIATION
 Repudiation: termination of the agreement by non-breaching party when other party breaches contract
 There can be two types of repudation:
o 1. Express repudiation (ex. “I am terminating agreement because you did x”
o 2. Indirect repudiation – by action of parties it appears as though they aren’t going to fulfill their
covenants
 In either case the other party has to decide:
o 1. Can accept repudiation, terminate contract and sue for damages
o 2. Can accept repudiation, terminate contract and seek the deposit
o 3. Reject repudiation, affirm contract and claim for specific performance
 To get specific performance you have to comply with your covenants (be ready, willing and
able)
Shaw Industries Ltd v Greenland (1991) BCCA
Facts: P responsible to prepare documents; delivered them to V’s lawyer but basically at a point where they
wouldn’t be received until too late; V decided to terminate agreement, but at this time they were in breach too
 Where cost of conveyance is to be borne by purchaser it is for the purchaser to prepare the transfer – it is
for the vendor to be ready to execute it
o It is not an answer in defence for V to say that P didn’t deliver documents on time
o The practice in BC for P to prepare documents and law that requires where P bears cost of
conveyance therefore is responsible for documents – don’t act as a defence to V’s Property Law Act
(s 4, 5) and CL duties to provide a registrable transfer
 This rule doesn’t apply in any circumstances where title to the lands is not registered in the LTO in the name
of the vendor – where the vendor must get in title he must prepare the documents [PLA s 6]
 What is legal position when both sides are in breach of obligations under contract in which time is of the
essence?
o Time ceases to be of the essence and either side can then give to the other a notice to complete the
transaction at a new time
o When both parties let the time go by and one of the parties wishes to reinstate time as of the
essence it is necessary to serve a notice upon the other party fixing a new date for closing which
must be reasonable and stating that time is to be of the essence with respect to the new date
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o

Contract still subsists – therefore neither party is relieved of his own contractual obligation to
complete by the failure of performance of the other
 can’t treat that failure as a repudiation
 to do so – must first give a notice and must at the time thereby fixed for completion be
himself ready, willing and able to perform
Obiter: how long the obligations of a contract can be held to exist if neither party does anything at all for a
substantial period of time?
o May be that if one party after a substantial period of time attempted to reinstate the obligation to
complete he would be met by the principle that equity aids only the vigilant (laches)
REMEDIES
SPECIFIC PERFORMANCE
 Equitable remedy – allows courts to force parties to comply with covenants of the contract (not just give
damages like CL provides)
 Historically real estate was seen as a unique asset – courts felt that non-breaching party couldn’t simply
replace, with money or otherwise, what they had expected to get out of the contract
 If you are going to claim specific performance:
o 1. State clearly that you are seeking strict performance by the other party
o 2. Ensure that you don’t commit an act that is inconsistent with the contract remaining alive (ex.
don’t require forfeiture of the deposit; this would be admission of termination of contract)
o 3. Must act reasonably quickly (general principle of equity)
o 4. To get specific performance you must be able to complete your covenants (be ready, willing and
able)
 If you choose to claim specific performance must also decide:
o 1. If you are going to reset the closing date (can send notice reseting closing date and making time of
the essence)
 If you do this you have to wait for the new closing date to pass before going to court
 If they miss new closing date you can continue your claim in court
o 2. If you don’t want to reset closing date – at any time before judgment is rendered you could
crystallize the breach and terminate the agreement (then sue for damages)
 You are in control as long as you have complied with all your covenants
Semelhago v Paramadevan et al (1996) SCC
What principles apply to assessment of damages in lieu of specific performance?
Specific Performance
 A claim for specific performance has the effect of postponing the date of breach
 Specific performance should not be granted as a matter of course absent evidence that the property is
unique to the extent that its substitute would not be readily available
o It can’t be assumed that damages for breach of contract for purchase and sale of real estate will be
an inadequate remedy in all cases
o Before P can rely on claim of specific performance to insulate himself from consequences of not
finding alternate property in mitigation of his losses – some fair, real and substantial justification for
his claim to performance must be found
 PROF: it’s not that difficult to find a unique aspect to the property; might be more difficult for residential
than commercial real estate; in commercial context there is more of a connection
Damages in lieu
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
A party entitled to specific performance is entitled to elect damages in lieu
o With specific performance – damages don’t crystallize until there is a pronouncement on the
contract (don’t know what damages are until contract is resolved – terminated or enforced)
o Practically we assess damages at date of trial (in perfect world it should be date of judgment – this is
when the contract is resolved)
 CL rule: general principle for assessment of damages is compensatory
o Innocent party is to be placed, as much as money can, in the same position as if the contract had
been performed
o Where contract for sale = usually assess damages as date of breach
 If this would give injustice – court has power to set another date
 Damages awarded must be a true substitute for specific performance – give as nearly as possible what
specific performance would have given
 No basis for deductions that are not related to the value of the property which was the subject of the
contract (here: meant that court didn’t deduct the increased value of P’s own property)
o These deductions would depart from the principle that damages are to be a true equivalent of
specific performance
PROF: thinks that this case and idea of unique quality of real estate – means it is unlikely that V will get specific
performance; what is unique about money they would have received if P forced to complete contract?
FORFEITURE OF DEPOSIT
 V looks to deposit for remedy
 If there is forfeiture clause V will be allowed to keep deposit (this clause is in standard contract)
o PROF: even if no forfeiture clause in agreement; if money identified as deposit V probably keeps
it
 Keep in mind if forfeiture of deposit is only remedy or if V could seek damages as well – important
where V has suffered damages in excess of the deposit
Hirst et al v Moore et al (1955) BCSC
 A purchaser who is merely in default but has not repudiated or abandoned his purchase is entitled, upon
cancellation by the vendor due to the default, to recover from the vendor instalments of purchase-money
paid, with the exception of any sum paid by way of deposit as a guarantee of performance of the contract
Mavretci v Bowman (1993) BCCA
 Court can relieve from forfeiture
o Court will look at what actual damages are and if they are less than the deposit amount will reduce
what V can keep – won’t allow a windfall
VENDOR’S LIEN
 Applies where purchase goes through – V delivers title; but P hasn’t delivered purchase price (V has lost
control of title at this point)
 V has an equitable lien over the property for the unpaid purchase price
Enforcement:
 Start a lawsuit for the unpaid purchase price
 Affect P’s title by filing something against title in the LTO; two types of filings:
 1. Caveat – the LTA allows for temporary claim to be registered against title
o Limitation: caveat has to claim an interest in land
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o

Money isn’t really an interest in land – but courts and LTO have interpreted unpaid purchase price
as being an interest in land (to allow V to file caveat against P)
o Lapses after 2 mos, but is renewable [LTA s 293, 291]
o Very difficult to get these registered – registrar has the discretion to register
 If you have a real claim the registrar will tell you to start a claim instead
 Usually register it where there is some risk of something happening to title
2. File a Writ – if claiming an interest in land or unpaid purchase price you can file against title
o Anything that happens after you file writ is subject to the resolution of your claim
Gordon v Hipwell (1952) BCCA
Facts: guy that paid purchase price with diamonds; diamonds seized; V seeks payment from Assurance Fund
 Assurance Fund: created by the LTA; can claim where because of mistake of LTO you suffered a loss
 Case affirms that vendor’s lien arises as equitable right even before a claim or action has started
o Contract creates beneficial title to P and a lien over that title for V until purchase price is paid
(Lysaght v Edwards)
 Court can enforce the vendor’s lien in the same way it would enforce a mortgage – can foreclose title on P if
it doesn’t pay full purchase price
o PROF: if you get your lien recognized on title it is a powerful remedy!
PURCHASER’S REMEDIES
 If P wants to terminate the contract – ask for return of deposit (then probably sue for damages)
 If P doesn’t accept V’s breach – sue for specific performance and don’t ask for deposit back
o If suing for specific performance make sure you tender what you are supposed to (be ready, willing
and able)
 P has equitable lien over property too – if price was paid but transfer didn’t occur they have registrable lien
similar to vendor’s lien
RESCISSION
 Rescission – the undoing of the contract; returning parties to original position
 Only two cases where rescission is possible:
o 1. Fraud – fraudulent misrepresentation or outright lie
o 2. Error in substantialibus
 Ability to rescind is limited to whether it is possible to undo the contract or not – whether parties can be put
back to original position or not (if not only damages are available)
FRUSTRATION
 Frustration: it is none of the parties’ fault, but circumstances have created a situation in which the contract
can’t be fulfilled
o Coronation cases – it’s not anyone’s fault; these are circumstances outside the parties’ control; the
contract is frustrated; attempted to relieve parties of the burden of the contract
COMPLETION/CLOSING
PROCEDURE
The contract will set out the process to be used
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Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
USING UNDERTAKINGS
 Lawyers for P and V advise clients that they must expressly agree to allow the lawyers to create a process
which will allow them to close - that will not strictly comply with "clear title for cash":
o P's responsibility is to deliver documents to V which are sufficient to convey title
o V will execute those documents and V's lawyer will send those conveyance docs to P's lawyer on
condition of P's lawyer undertaking to:
 make no use of those docs until the P's lawyer has in their possession either all of the cash
needed to close or all the documents and other things required by P's lender in order for
lender to finance and further undertaking of P's lawyer that once first part of undertaking
has occurred they can use transfer to transfer title on condition that as soon as that is
registered they will request funds from P's lender and provide those funds to the V
immediately upon receipt
o P's lawyer says I will give the V's lawyer the funds necessary to complete on the V's undertaking
to:
 Pay the V's lender the amount required by it to payout and discharge the V's mortgage and
once that mortgage is paid out to require the V's lender to provide a discharge of the
mortgage and the V's lawyer must register that and report the registration to the P's lawyer
within a reasonable time
CBABC Undertakings also require that V’s lawyer has to produce additional documents to P’s lawyer:
1. payout statement from V’s lawyer – indicating how much it needs to pay out the mortgage and
commitment by V’s lawyer to discharge mortgage on receipt of that amount
2. a copy of the V’s lawyer’s cheque which was sent to the V’s lender
3. commitment that if V’s lawyer doesn’t receive a discharge from the lender within 60 days they will
take all “commercial, reasonable actions” to get the discharge from V’s lender
These undertaking promises are between lawyers – lawyers can report each others’ breach; and have right
against the other lawyer (it is unclear if P himself has any right against V’s lawyer)
*There is no other way to close residential deals – must use the undertaking process*
Commercial context – usually more clear about process that will be used; can be done through undertakings too
POST-COMPLETION
DOCTRINE OF MERGER
o
o
o
o
Doctrine that the lesser deed merges into the greater deed
Unless there is contrary intention – any reps and warranties V has made in the contract are spent and can’t
be relied on after registration of title
o Reps and warranties in the Form A – including implied from LTFA – are still effective after
registration
Survival clause – if present, all reps and warranties survive the closing; they continue; if they aren’t fulfilled
you can sue on them, even after completion
Two exceptions:
o 1. Error in substantialibus
o 2. Fraud
o If either of these exist you may be able to go back and still have a claim with respect to a rep that
didn’t otherwise survive
45
Real Estate Transactions
Law 455 – Greg Umbach
Camille Chisholm
Fall 2011
IMPLIED COVENANTS
WARRANTY OF FITNESS (HABITABILITY)
 The CL implies into the purchase of a newly built or renovated home – a warranty that the work has been
done in a good and workmanlike manner
o Includes: that the builder has used good and proper materials; and that property is reasonably fit for
human habitation
o Particularly applies to a house that is not quite complete – must be new construction and the idea of
completeness is a question of fact for the court
o “workmanlike manner” – what the standard of the profession would be
 From the LTFA – the Form A transfer implies certain covenants
o Transfer includes all buildings and benefits attaching to the land
o That purchaser will have quiet possession
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