Specific Performance for Seller Who Vows: “There Will Be No Closing”

In a recent case, the buyer was a project-specific company incorporated to buy the disputed land. The seller was a corporation, headed up by a sole individual. Over a period of several months, they negotiated through their agents for the purchase and sale of the seller’s 32-acre property, which was directly adjacent to land the buyer already owned. The buyer’s intent was to assemble land for future industrial development.

The negotiations culminated in the buyer making an offer, and the seller apparently accepting and providing some needed documents for closing.  Importantly, the seller had an idiosyncratic preference – which the buyer accommodated – around not reducing the deal to writing until just prior to closing. This meant that aside from some initial drafts and exchanged documents, there was no signed final agreement reflecting all the agreed terms.

Nonetheless the buyer continued to get ready to complete the transaction, and advised it was in funds and ready to tender. The seller then raised some late-breaking objections, and on the eve of closing by way of a 4 a.m. email to his agent declared: “There will be no closing”.

The buyer accused him of failing to close without lawful excuse; the seller claimed there was never an agreement reached at all. He insisted that he merely walked away before a deal was struck, because the negotiations had become needlessly complicated by the buyer’s lawyer. Even if there was a deal, the seller claimed it was unenforceable under the Statute of Frauds, which requires land deals to be in writing.

The court found that the buyer’s action for specific performance was allowed.  There was sufficient evidence in writing to prove an oral agreement, along with many acts of part performance to confirm it.  Through correspondence, all the essential terms of the deal were agreed-to, which included: (1) the identity of the parties; (2) the description of the property; and (3) the purchase price. A written agreement was not necessary here.

The Statute of Frauds also did not come into play to render the oral contract unenforceable. The statute’s writing requirement was also satisfied by the parties’ correspondence. In addition, there was ample part performance of the contract by the buyer, to its detriment. It had prepared for closing by getting an environmental assessment, obtaining survey and title searches and hiring a real estate lawyer to negotiate and draft the written agreement. It also delivered the required documents on the closing date and tendered a certified cheque in full payment. Conversely the seller also hired a lawyer and provided various documents. These acts all referred unequivocally to the contract for the specific property. It would be inequitable to allow the seller to now rely on the Statute of Frauds to avoid fulfilling his end of the bargain.

The court also noted that some of the seller’s key evidence was contradictory: For example, his 4 a.m. email that there would be “no closing” belied his purported belief that there was no deal at all.

Having concluded there was a valid oral agreement that the seller breached without justification, the court turned to the remedy. Damages were inadequate in light of the buyer’s future development goals and would be difficult to calculate. Specific performance was more appropriate, since from the buyer’s standpoint the property was unique. It was adjacent to land it already owned and there were no other adjoining properties for sale. See: 2730453 Ont. Inc. v. 2380673 Ont. Inc., 2022 ONSC 6660; costs decision at 2022 ONSC 7115. Note: an appeal of the decision has been filed.

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