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Closing Date Deemed Not an “Essential Term” of Sale Agreement

In an interesting recent case, the court concluded that the closing date was not an “essential term” in an agreement by a land developer to sell 48 vacant lots to a prospective home-builder. The court also ruled that the parties had agreed to amend the closing date, even though a written amending agreement was never signed.

The Agreement of Purchase and Sale between the seller and buyer contained a provision stipulating a year-long range for the closing date, namely within 12 months following the seller’s completion of permit-servicing requirements for the lots, but no later than November 1, 2018. This meant the permits servicing requirements would have to be completed a year earlier, i.e. November 1, 2017. Unfortunately, they were not completed on time.

This prompted a dispute as to whether the deal was still valid. The seller claimed it was defunct once the November 2017 deadline had passed, since the ability to close 12 months later was then precluded. The buyer countered by stating that the closing date was never an essential term; moreover, the deal was still effective since they had agreed it could close on some reasonable future date.

In hearing the dispute, the court agreed that the deal could never have been closed in time for November 1, 2018, once the permit servicing requirements deadline had lapsed exactly one year before.

However, that did not end the matter, since the closing date was never an “essential term” of this Agreement. Indeed, the court found that the parties had mutually agreed in principle to amend the closing date in the course of their dealings, even though they never signed a written amending agreement or settled on a firm replacement date for closing.

In law, the essential terms of a land sale contract are typically the parties, the price, and the property. The closing date may become an essential term if the parties make it one, but in this case they did not. The evidence here showed that the seller never considered the Agreement to be truly conditional on permit servicing requirements being completed by November 1, 2017. This conclusion was bolstered in the correspondence between the parties’ lawyers, where a potential amendment to the Agreement’s closing date was cooperatively discussed.

More to the point, the court noted that the parties had themselves been informally discussing the terms of a written amending agreement, which the seller had drafted and given to the buyer to sign. Their discussions ultimately faltered since the amendments included new terms; in the end, it was never actually executed.

The court noted that at no point did the seller express concern over extending the closing date per se. Although he claimed he told the buyer there was a November 1, 2017 deadline to sign an amending agreement, the buyer refuted it and there was nothing in writing. Yet only two days after the deadline, the seller suddenly asserted that the original deal was “frustrated” due to the buyer’s failure to sign the amending agreement. This, in the court’s view, raised questions about the seller’s good faith in the transaction.

The court also pointed out that the seller’s insistence on having a signed amending agreement was reasonable, but the failure to give the buyer written notice of any signing deadline was not.
The court concluded that the seller had no legal right to use the non-delivery of a signed amending agreement as grounds to consider the entire Agreement at an end. The court confirmed the validity of both the original Agreement and the closing date amendments, and declared them binding and enforceable between the parties, in accord with its express written terms. See: Rolling Meadows v. 2560262 Ontario Inc., 2018 ONSC 5063 (CanLII)