topbar

Articles

Entire Agreement Clause Enforced, Nullifying Alleged Representation by Realtor

The buyer of a residential townhouse entered into an agreement of purchase and sale with the seller/developer. The agreement called for the buyer to submit three deposits, with the third one to be paid by way of cheque dated 120 days following the date on which the agreement was signed.

However that third deposit, for $12,000, was never submitted. The buyer later claimed that under a verbal agreement with the real estate agent – who was a dual agent acting for both buyer and seller – it had been agreed that the third deposit was unnecessary. Instead, he would be required only to submit two deposits totaling $14,000, representing five percent of the purchase price. He claimed this verbal agreement was the “actual” agreement between himself and the seller, essentially supplanting the written one he had initially signed.

The issue came to a head when, more than a year after the agreement date and nine months after the third deposit would have been due, the seller advised that it required the final deposit had to be paid within five days. Otherwise, the seller stated it would consider the buyer to be in breach of the strict wording of the agreement, and it would exercise its right to terminate the agreement.

After the third deposit was not paid by this deadline, the seller terminated the agreement. In turn, the buyer sued for specific performance of the contact, and for summary judgment in his favour.

Before the court, and in addition to raising the alleged verbal agreement between him and the real estate agent, the buyer noted that after the deadline for the third deposit, the seller had twice extended the occupancy date, but failed to follow the agreed procedure for doing so. He claimed this deviation from the strict wording of the agreement was one that affected their overall contractual relationship. To allow the seller to later insist on the strict wording of the initial agreement would put the buyer in an unfair position.

The court disagreed with this reasoning and found for the seller. The buyer had not proven the existence of an agreement between him and the real estate agent to waive the strict requirements relating to the third deposit. There was no “promissory estoppel” preventing the seller from insisting on payment. Nor had the buyer proven reliance, to his detriment, on the alleged representation.

Plus, the seller’s extension of the agreement on two occasions, and its failure to insist on the third deposit, were not indications that it intended to disregard the agreement provisions that called for the deposit to be paid. The court found that the seller was simply unaware that the buyer had never paid the third deposit as required.

In any event, the wording of the contract was clear: It contained an “entire agreement” clause, the legal effect of which was to foreclose the buyer from relying on the supposed verbal agreement with the real estate agent. Such “entire agreement” clauses cover even those representations made before the agreement is signed, and in the court’s words are intended to lift and distill the parties’ bargain from the “muck of negotiations”. The court also noted that the buyer had reviewed the agreement with a lawyer, before signing it.

Simply put: By failing to submit the third deposit, the buyer was in default of the agreement, leaving the seller free to terminate the deal and keep the two initial deposits. See: Kitchen v. Silver Heights Developments Inc., 2017 ONSC 3932.