****Pages 1-10 are a short summary****

Initial Approach to the Breach of a Real Estate Contract

1. There was a written Agreement of Purchase and Sale: Examine the
terms of the contract; courts will often show deference. Then ask:
a. Is it enforceable? Contracts may be unenforceable due to mental
incompetence. Bowser vs. Prager establishes that a party
seeking to avoid a transaction on the grounds of mental incapacity
must est. that 1) they were mentally incompetent at the time, and 2)
that the other party had actual constructive knowledge of this. The
court may also find a contract unenforceable if executing the contract
would cause and undue hardship (1110049 Ontario Ltd. v
Exclusive Diamonds Inc). In considering this equitable remedy, the
court looks only at the hardship of the party seeking relief from their
duties under the contract at the time the contract was enforced. The
court in McMullen v McMullen clarified that evidence of
improvident decision making is not sufficient to find an individual
mentally incompetent. In addition, the court in Banton v. Banton
imposed a higher duty of care on lawyers who knowingly deal with
incompetent individuals. Where mental incompetence or undue
hardship can be proven by a party, the court may find the contract
unenforceable.
b. Did the parties act in Good Faith? If you have a duty in the
contract (promise to do something, like check the zoning of the land),
you must act in good faith in carrying out that duty. If you breach
that duty, you have breached the contract and are liable. When
determining whether a party acted in good faith, LeMesurier v.
Andrus proposed the following test: Can the party substantially
perform their promises made in the contract? This ensures that a
vendor/purchaser who seeks to take advantage of a clause which
terminates the contract must exercise his right reasonably and in
good faith and not in a capricious or arbitrary manner. It should be
noted that Peel Condominium Corp. No. 505 v Cam-Valley
Homes Ltd establishes that parties are not obligated to bargain in
good faith, only to carry out their contractual duties in good faith.
c. Was the Lawyer liable for Contractual Deficiencies? Wong v
407527 Ont. Ltd established that If the parties and the agents sign
the contract and deliver it to the lawyer after it is signed, the lawyer
is not responsible for the flaws in the contract. If the clients wish to
extricate themselves from the deal, then it is the lawyers duty to
point out the flaws in the contract.
d. Are there Contractual Fiduciary Duties?
2. There was not a written Agreement of Purchase and Sale:
a. What effect does the Statue of Frauds have? The Statue of
Frauds dictate that unless there is a written singed contract between
the parties, the contract is unenforceable. This Statue was developed
to protect parties who may be held to a non-existent contract due to

fraud. However, this may have an unfair effect on parties who

entered into an oral or non-written contract, who perform their end of
the contract to their detriment, and then see the other party withdraw
from the contract relying on the Statue of Frauds. In response to this
problem, the Common Law developed the concept of part
performance to determine whether a plaintiff's conduct based on
her belief that a contract exists justifies enforcement of the contract
even though it has failed to comply with the statute of frauds. The
leading case in establishing the common law rule of part performance
is Deglman v. Guaranty Trust, which dictates that in order for acts
to constitute part performance in a real estate deal, it must be
evident that the acts unequivocally related to the K for the purchase
of the land. Taylor v. Rawana further elaborates that The doctrine
was designed to ensure that equity be done where the defendant has
stood by and allowed the plaintiff, to his detriment, to fulfil his part of
the oral contract, and where it would be unconscionable for the
defendant to set up the statute by asserting that the contract is
unenforceable so that he might retain benefits which have accrued to
him from the contract. Tavares v. Tavares (2001, Ont CA)
establishes a threshold test for part performance, where the court
asks: in light of the actions taken by the party seeking to enforce the
contract, would it be unconscionable not to enforce the contract?
However, there are two cases which complicate the issue: Erie Sand
and Gravel Ltd. v. Seres Farms Ltd tool the doctrine of part
performance to such an extreme that is essentially gutted the Statue
of Fraud. Following the decision in Erie, Simply discussing the basis
on which a deal may close and asking the other side to put in in
writing could constitute part performance, and the detriment would
be not receiving the land. The judgment tries to avoid this Pandoras
Box by saying it is unique facts having to do with the right of first
refusal the court does not acknowledge that this holding potentially
changes the law. Wallace v. Allen found that a Letter of Intent
became a binding contract where it used the language of contract
and a part can demonstrate part performance. This could have a
detrimental effect on the parties ability to enter into protected precontractual negotiations. However, this decision is tempered by Peel
Condominium Corp. No. 505 v Cam-Valley Homes Ltd where the
court applied the doctrine of Ad Item (meeting of the minds) to
conclude that there was no contract because the terms were still in
the process of being negotiated.
b. Are there non-contractual Fiduciary Duties?
3. Were there any False Statements that induced the noncontracting party to enter into the contract? P may rescind the
contract prior to closing for any misrepresentation (innocent, negligent, or
fraudulent) provided it is a false statement that is (1) material, (2) relied
on by purchaser, and (3) induced P to enter into the K. Under this same
criteria, and injured party may also seek damages for negligent or
fraudulent misrepresentations. Post-closing, P may only exercise the right
to rescission based on a fraudulent misrepresentation. P may also rescind

based in undue influence, duress, non est factum, breach of FD, or

illegality.
4. Did the breach result from either parties failure to perform a
contractual duty which constituted a Condition, Representation
or Warranty?
a. A Condition is a set of events that must exist before a party is bound
by its promises. A contractual condition can be found to be either a
Condition Precedent, or a True Condition Precedent. The main
difference is that a true condition precedent is provided for the
benefit of both parties, and depends on the will of a third party to
fulfill (Turney v. Zilka). Because the rule in Turney v Zilka can
prove problematic, parties can contract out of it (Barnett v
Harrison). A condition precedent, on the other hand, is only for the
benefit of one party and within the control of the parties to fulfill. The
party for whose benefit the condition was drafted can waive a
condition precedent, whereas a true condition precedent cannot be
waived. In addition, a condition precedent doesnt need to be strictly
fulfilled, as long as party for whos benefit the condition exists is
satisfied that it has been fulfilled Beauchamp v Beauchamp). On
the other hand, when a party is evaluating whether a condition
inserted for their benefit has been satisfied, they are expected to act
reasonably - the correct test in asking whether the efforts were
satisfactory to a reasonable person with all the subjective but
reasonable standards of the other party (Flack v Sutherland). The
parties must act reasonably when assessing whether a condition has
been fulfilled even where the contract attempts to purport the
standard of sole discretion (Marshall v Bernard Place). If there is
a breach of condition precedent, the innocent party may elect
to accept the repudiation, or attempt to enforce the contract
through specific performance. However, for a party to be found
innocent they must prove they acted in Good Faith. Marleau vs.
Savage held that as long as you act reasonably to fulfill the
condition, you have satisfied your obligation - the test is not how
another purchaser might have acted, but did this purchaser act
reasonably in light of the circumstances. In addition, each party is
required to make reasonable efforts to satisfy conditions within their
control (Chan v. Hayward).
In addition, Big Promises in the contract may be considered by
the court to be so integral that it rises from a warranty to the level of
a condition. When determining is a provision in the contract is a
warranty, or if it rises to the level of a condition, the court will look at
the intention of the parties (Jorian Properties Ltd. v. Zellenrath).
But because the out come of such litigation can be unpredictable, it is
safer to advise your client to close and sue for damages than to rely
on rescission. While language such as provided that usually means
a condition precedent, the court may find it was a warranty in the fact
that it is a lesser promise, the breach of which can lead to remedies
but not recession (Fraser-Reid v Droumtsekas). If there is a
breach of condition precedent, the innocent party may elect

to accept the repudiation, or attempt to enforce the contract

through specific performance.
b. A Representation is characterized as a statement as to a state of
affairs that is intended to induce the party to enter into the contract.
See #3 above.
c. Assuming a Warranty is not found to be so integral that it is
characterized as a Condition, then the only recourse is to close the
deal and sue for damages. However, in order to demonstrate
entitlement to damages, you must be able to illustrate that the
promise did not merge on closing (merger means that when you
register the deed, the deed effectively says that I accept the property
as is and cannot sue on any promises). Court has determined that
merger is a matter of intention did the party intend for the promise
to carry-on after closing (courts typically hold that promises did not
merge)
5. If there has been a breach of a Big Promise, was Time of the
Essence? TofE is a triggering device which constitutes a Big Promise
Remedy. The courts of equity established that time is of the essence in
a real estate transactions, due to the fact that the market fluctuates such
that closing on a certain date could be fundamental to what you are
buying. However, the court of equity has said that in certain
circumstances, parties could not have intended for time to be of the
essence. This is essentially an on/off system if it is on and there is a
breach of a big promise, the injured party can accept repudiation or
enforce specific performance. If they accept repudiation, they are
relieved of their duties. If one party is ready to close on the closing date
(innocent party), time of the essence is on. If both parties default, then
TotE is turned off and the contract is valid - either party can turn it back
on by giving reasonable notice of a new closing date.
Salama Enterprises (1988) Inc. v. Grewal complicates this remedy
in the context of its specific facts by giving equity the ability to qualify the
right of an innocent party to repudiate when the other party defaults and
TiotE is on. In order to find for P, rather than allow V to accept
repudiation and end the contract in light of Ps default, the court twisted
the terms of the contract to find the Big Promise at hand was a common
intention meaning V had an implied promise to facilitate P in fulfilling
their promise by, for instance, allowing and extension or accepting an
undertaking. The dissenting judgment strongly criticized the finding of a
common intention as it essentially re-wrote the contract making
contracts less reliable. However, there are mechanisms via which the
court can find that TotE was off due to the actions of V, such as where V
extended the closing and did not make time of the essence, or V has
waived TotE by giving a series of extensions leading P to believe they
would continue to receive extensions.
In a situation where both parties default turning TotE off (and the
contract continues), appropriate notice, such as a letter, must be given to
turn TotE back on (King vs. Urban County). Domicile v McTavish
expanded on the rule in King v Urban Country stating that If a mutually
defaulting party makes in impossible to close the deal, they cannot turn

TotE back on. In addition, a party who insists on strict performance of the
contract, and then defaults if barred from turning TotE back on (Kwan v
Cooper).
6. Was V able to provide Good and Marketable Title? Ontario has
implemented a Title System, which essentially means for every property
registered in Land Title, the government guarantees good title to P. This
system operates on 3 principles: 1) the government was erected a
curtain around the title which P is not obligated to look behind, the title
search mirrors the real title, and should the title turn out to be deficient,
the government has insured the title meaning P will be compensated.
Section 10 (p. 351) of the standard Agreement of P&S is a title clause
which states that P will take title provided that title to the property is
good and free from all registered restrictions and, charged, lien and
encumbrances. In order for character of the title to meet the
requirements laid out in the section, it must be marketable, meaning of
the quality the courts would forced upon an unwilling purchaser who is
not compelled to take a title which would expose him to litigation or
hazard (Clement vs. Wyatt). The title clause has been interpreted as a
Big Promise, meaning that if V fails to provide good title, P can elect to
accept the imperfect title and sue for damages, or they can walk away
form the contract. However, there are some encumbrances on title which
are not thought to impact a finding of good title such as: registered
restrictions and covenants that run with the lands which have been
complied with, registered municipal agreements if complied or security
(Stefanovska vs. Kok), minor easements supply of services to property
or adjoining, and easements for serviced which do not materially affect
present use. Conversely, title defects which P will not be forced to
take include potential heritage designations (Goldstein vs. Davidson),
demolition orders (Kolan v. Solicitor), In addition, if the court finds that
P bargained for title with a wart, then P can be forced to take title subject
to that wart (Tonys Broadloom). The court in Tabatta vs. Williams
held that new construction requires a occupancy certificate in order to
constitute good title.
Where a defect in title is found that affects the marketability, such
as a lease which cannot be disclosed (11 Suntract Holdings Ltd), P
must act in good faith when exercising their right to repudiate the
agreement (Green v. Kaufman). For instance, If the title defect is
immaterial, P has no right to repudiate (LeMeusier v. Andrus), the
defect in title must satisfy the de minimus principle (Toll vs.
Marjanovic). In the case of an open contract with no Title Clause,
Yandle vs. Sutton complicated the issue by finding a patent defect on
title, which could lead Vs to argue that the title defect objected to by P is
patent, so P is stuck with it. However, the title clause affirms the
standard of marketable title in contractual relationships. The issue was
clarified in Steiglitz vs.Prestolite where Justice Laskin affirmed that the
appropriate test was not whether the defect was patent or latent (as
applied in Yandle & Sons v. Sutton), but whether the purchaser was
faced w/ acceptance of property which would be materially different
from that for which he bargainedIf the undisclosed easement materially

affects the land in question, then the objection to the easement is a valid
one.
Simple Objections to Title must be requisitioned by the date
listed in the Agreement of P&S; if P fails to submit requisitions respecting
objections to title w/in the required time, they will be deemed to have
accepted the vendors title (Majak Propertyies Ltd. v. Bloomberg).
Requisition of Conveyance (wholly within the control of V) can be
requisitioned at any time before closing. Toth v. Ho established at
Requisitions going to the Root of Title may also be requisitioned after the
requisition date (i.e. extraordinary situation where P would receive
nothing).
If P requisitions a defect on title, the Rescission Clause in the
agreement of P&S allows V to rescind the contract provided that P made
1) a valid objection to title which is 2) made in writing, 3) which vendor is
unable or unwilling to remove remedy or satisfy or obtain insurance and,
4) purchaser will not waive it, then, the agreement is at an end. This
is a vendor driven remedy system imported from Bain v. Fothergill to
allow vendors who are bona fida, once they discover their title is bad, to
can call off the deal. Courts dont like this provision (they want purchaser
to be able to take property and sue for abatement), so they have put
limits on the exercise of this clause. For instance, a reckless vendor is
not entitle to rescission (11 Suntract Holdings Ltd).
Liabilities of Specific Parties
Determining the Liability of the Purchaser Post-Breach
1. Determine who the Purchaser is: The Privity of Contract rule
establishes that an injured party can only obtain damages from the
individuals they dealt with in the course of the contract, except in the
case of an agency relationship, where the agent is not liable for the
contractual obligations of their principle, unless the contract is under
seal. Where a trustee is party to the contract, the trustee is liable for any
damages resulting from the breach. However, Trident established that a
bare trust, where the trustee has no operations discretion and acts as an
arm of the principles, creates an agency rather than trust relationship. In
regards to a contract under sela, Friedmann Equity Developments
Inc. v. Final Note LTD established that the beneficial owner is not liable
for breach of a sealed contract, and that the law will enforce a contract
under seal even without consideration. Furthermore, the court held that a
corporate seal equivalent to signature, and ,ortgages automatically
sealed contract. In situations were an individual signs for a company that
is to be incorporated before the completion of the contract, 1394918
Ontario Ltd. v. 1310210 Ontario Ltd stipulates that while the CL
requires two parties to be liable under the contract at all times, the
Business Corporation Act protects persons signing for unincorporated
companies that fail to become incorporated by stating that they are not
liable for the contract (leaving only the other party contractually
obligated).

Determining the Liability/Obligations of the Agent

How to Analyze a Real Estate Agent Fact Situation
1) Is there a contract?
2) If there is a contract, are there contractual Fiduciary Duties?
3) If there isnt a contract, are there other Fiduciary Duties?
4) Were there any false statements that induced a non-contracting party to
enter into the agreement?
1. Is there a Contract (To whom does the Agent owe Duties)? While
an agent is given the authority to market the property under an agency
contract, they dont have authority to offer the property (vendor is not
making an offer to the world this is an invitation to treat); the purchaser
makes an offer, and the vendor then decides to accept. An agent has no
authority to bind the vendor without explicit instructions (Peacock v.
Wilkinson and Tinck), and as such, cannot accept an offer without the
explicit permission of their principle (Hunter v. Baluke). An agents
commission is only payable upon closing unless the vendor arbitrarily
terminates the deal (Luxor (Eastbourne) Ltd. (In Liquidation) and
Others v. Cooper). In addition, when a contractual disagreement arises,
as between the listing agreement and the agreement of P&S, the listing
agreement will dictate the agency contract (Leading Investments vs
New Forest).
Under the former regime of Agency relationships in real estate,
because Ps agents was technically paid by V, Ps agent owed fiduciary
duties to V. However, Knoch Estates v. Picken corrected this conflict of
interests saying an agent cannot serve two principals where their
interests are in such basic conflict as that of purchaser and agent in a real
estate transaction. The court added the qualification that the
purchasers agent may create a situation where the vendor reposes trust
and confidence in the agent to such an extent as to put the agent in the
position of a fiduciary. However, the three concurring judgements
diverged on what circumstances give rise to Ps agent owing FDs to V.
Griffiths argued that Ps agent owes a limited duty to V to present offers
and not directly mislead them, but this limited duty does not give rise to
broader fiduciary duties. Finlayson argued that the payment mechanism
does not create an agency relationship, nor does the MLS agreement or
presenting of the offer create. Doherty agreed there are no FDs owed by
Ps agent to to V, and refuses to use this case to clarify the duties of the Ps
agent to the V. These divergent judgments have not been resolved, so the
legal consequences are still confusing. If an agent is acting as a Dual
Agent, Raso v. Dionigi, prescribes that the agent has a duty to disclose
material facts to both parties. This case makes it clear that where an
agent acts for both parties, the contract should make it clear that the
agent is not bound to reveal material facts communicated by cone client
in confidence to the other. A Dual Agency is not created where an agent
accepts deposit monies from the non-contractual party; instead, in the
case of deposits, the agent is acting as a stakeholder for either the third
party or the principal, depending on who is ultimately entitled to it (Toll
vs Marjanovic). In terms of Vs agent owing a duty to P, Mucci v. C.M.F

Realty Ltd established that Vs agent may have a limited Duty to Advise
if P relied on them for market and pricing information
2. What Duties does the Agent Owe (contractual/fiduciary)? All real
estate agents owe the FDs of confidentiality, candour, and loyalty to
their clients (Hodgkinson vs. Simms). Hodgkinson also sets out
several indicia to assist in recognizing the existence of fiduciary
relationships established in Knoch Estates: (1) scope for the exercise of
some discretion or power; (2) that power or discretion can be exercised
unilaterally so as to effect the beneficiary's legal or practical interests;
and, (3) a peculiar vulnerability to the exercise of that discretion or
power. However, these criteria are discretionary as 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. The law has also developed to
obligate and agent to act as a reasonably competent agent on their
clients behalf, and depending on the case, there may be additional
contractual obligations imposed on the agent. The Duty of Loyalty
was breached by the agent in Soulos v. Korkontzilas; here the court
imposed a constructive trust as a result of a breach which met the
following 4 criteria: 1) The defendant must have been under an equitable
obligation 2) The assets in the hands of the defendant must be shown to
have resulted from deemed or actual agency activities of the defendant
in breach of his equitable obligation to the plaintiff 3) The plaintiff must
show a legitimate reason for seeking a proprietary remedy 4) There must
be no factors which would render imposition of a constructive trust unjust
in all the circumstances of the case. Phillips v. R.D. Realty Ltd
stresses the fact that parties seeking recovery after a breach must be
able to prove damages. Finally, the Duty of Candor was litigate in
Ocean City Realty Ltd. v. A & M Holdings Ltd where the court
developed an objective test in order to determine the extent of the duty
by asking by what a reasonable man in the position of the agent would
consider, in the circumstances, would be likely to influence the conduct of
his principal? Knoch Estates v. Picken further clarified that Ps agent
has no duty of candor to V, but they cannot make misrepresentations.
3. Did the Agent Act Negligently? The standard of care for negligence in
an agency relationship is that of a prudent agent. Case law has
established certain principles that help clarify what constitutes
negligence on the part of a real estate agent: an agent who represents
themselves as a specialist or expert has a higher duty of care (Olsen
v. Poirier), an agent who does not inform themselves regarding market
conditions falls below the standard of care of the prudent agent (Wong
v 407527 Ont. Ltd), and an agent can be found negligent for
contractual deficiencies such as not securing a rental guarantee where
the rental income was relied upon (Wong v 407527 Ont. Ltd), or
recommending their clients rely on inadequate warranty statements,
especially while simultaneously failing to disclose material facts (Vokey
v. Edwards). There are several possible consequence of an agents
negligence: an negligent agent will be disentitled to commission (11

Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd), the

brokerage can be found jointly and vicariously liable for the agents
negligence (Vokey v. Edwards)
4. Were there any False Statements that induced the noncontracting party to enter into the contract? ***See Above.

Other Importance Considerations

What is being Bought and Sold in the Transactions? Chattels v Fixtures
and Legal Description issues (see summary).
Does Equitable Conversion affect who is liable for Damage to the
Property?
Lysaght v. Edwards established EC stating that the moment you
have a valid contract for sale, V becomes in equity a trustee for the
purchaser, and the beneficial ownership passes to P. V has a right to the
purchase money, and may put charge or lien on the estate for the security of
that purchase-money (a vendors lean is a powerful contractual remedy which
can be enforced like a mrtg (Silaschi vs. 1054473)). If anything happens
to the estate between the time of sale and the time of completion of
the purchase, it is at the risk of P. However, if V willfully damages or
injures the property he is liable to P; more than that, he is liable if he does not
take reasonable care of it (V. Rankins Mechanical contracting Ltd. v.
First City Developments Ltd and Lichtenberg v. Johnstone et. Al). In
addition, if damages occurs at no fault of V where V actively conceals it
barring P from exercising rights under contract, V may assume an a-typical
liability (Abel v. McDonald).
Equitable conversion was developed to protect the interests of P from
the time the agreement is signed until closing, but it has some undesirable
practical effects in terms of liabilities. The modern Agreement of P&S
contains a Contractual Risk Claus which reads all things being purchased
shall remain until completion at the risk of the Vendor . . . in event of
substantial damage, P may either terminate agreement or take insurance
proceeds. In effect, the parties saying by contract that they want the
practical impact of the equitable conversion to be reversed. Loewen v.
Neumann held that the Risk Clause is to be treated as at least a Warranty
extended by V for the benefit of P (meaning the remedies associated with
warrenties would apply). However, there is no test for determining what
constitutes substantial damage, and P may not be entitled to Vs insurance
money, as an insurance is a personal contract and does not run with the land

(Rayner v. Preston). Wile v. Cook elaborates as to the effectiveness of the

Risk Clause in reversing EC All the clause provides for is that if P elects to
go through with the purchase he is entitled to whatever insurance proceeds
may be owing. It does not give P any guarantee that the insurance is
necessarily collectible. The SCC, in Wile implied a term of contract that the
closing date will be extended for a reasonable time to find out what the
insurance is and also said that they need to tell P what the insurance is.
What is the Effect of Caveat Emptor?
***If there is concealment, fraud, or misrepresentation, a warranty,
or a promise about the condition/item, you do not need to discuss
whether the defect is latent or patent
*** Ct says, if you could see it, you are stuck with it; if you couldnt see it,
maybe you will be stuck with it, maybe you wont. Clause is meant to say you
did inspect it, and you are stuck with all patent defects. But if you dont
inspect you are still stuck with the patent defects. By giving the purchaser
the right to inspect you are shifting more things out of the latent box into the
patent box.
Caveat Emptor is a warning that notifies a buyer that the goods he or
she is buying are "as is," or subject to all defects. When a sale is subject to
this warning the purchaser assumes the risk that the product might be either
defective or unsuitable to his or her needs. In McGrath vs. McLean, Justice
Laskin established that absent fraud or misrepresentation, you take the
property as you find it. There are several exceptions to CE which include:
contractual warranties, CL implied warranties (Fraser-Reid v.
Droumtsekas, Jaremko v. Shipp Corp), statutory warranties (Grudzinski
v. Ontario New Home Warranty Program), misrepresentation (Thiel vs.
Milmine, Heightington, Patay v. Hutchings, Goldstein vs. Davidson)
silence amounting to a misrepresentation (Sevidal vs. Chopra), active
concealment, fraud (Jung v. Ip, Abel v. McDonald), error insubstantialus,
and the existence of latent defects (a fault in the property that could not be
discovered by P).
Sellers are obligated to disclose material latent defects that they are
aware of, but buyers are expected to discover patent defects on their own. A
latent defect is considered material if it renders the property unfit for
habitability, dangerous, creates a health and safety hazard, or is something
the reasonable purchaser would find material, and the onus is on P to prove
this (Ceolaro v. York Humber, Swayze vs. Robertson). There is no duty
to disclose a latent defect which V is not aware of (McGrath vs. McLean).
The duty to disclose latent defect within the knowledge of V also extends to
latent defect in the neighbourhood (Sevidal vs. Chopra), but again, P must
prove such defects meet the criteria for actionability (Godin v. Jenovac) If a
latent defect only goes to the value of the property, you are not required to
disclose it (i.e. a death on the property).
The latent/patent defect regime transfers responsibility for discovering
certain defects to P. For example, the court places additional burdens on P,
such as the duty to inspect if there is an indication of a Patent Defect (Tonys
Broadloom & Floor Covering Ltd. v. NMC Canada Inc), and the become
informed by, for example, consulting public records (Marathon Realty v.
Ginsberg). However, in situations where P acted reasonable to detect

10

defects, the court has attempted to alleviate this burden the court in
Winnipeg Condominium Corp v. Bird Construction, based on the facts of
the case, held that a purchaser who takes reasonable steps to Inspect is not
liable for defects due to contractors negligence. In the broader picture, in
order to determine is something constitutes a defect in the land at all, the
use of the land must be taken into account (Tonys Broadloom & Floor
Covering Ltd. v. NMC Canada Inc).
Should the Party seek Specific Performance?
Specific Performance is a remedy whereby an injured party can enforce
the terms of the contract, possibly with abatement. Under the old law, SP was
almost automatically available to both P and V (Bashir v. Koper [1983]
OCA). However, under the current system, in order to be allowed to exercise
SP, P must demonstrate that there is no suitable alternative (uniqueness),
and as such, damages are an inadequate remedy. When evaluating whether a
suitable alternative is available, the court will look at availability at the time
of the breach (John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd). The
party who is claiming the property is unique has the burden of proof (904060
Ontario Ltd, 11 Suntract Holdings Ltd). Because of this requirement, if P
desires a property exclusively for profit, the remedy of SP is not available to
them bc a property purchased for profit cannot be unique (Domowicz vs.
Orsa, Semelhago).
Once it is determined that a party is entitle to SP, the court needs to
decide from what date the damages flow the date of breach, mitigation date
(the date by which the injured party should have or did mitigate their
damages), or the date of the judgment. However, only in extreme situations
will the court evaluate damages at the time of judgment, so it is in the best
interest of the injured party to mitigate their damages (Annsdell v.
Crowther); however, there are situations where the damages will be
assessed later (Wroth and Another v. Tyler). A party who is entitled to SP
also has the right to elect to damages in lieu of SP (Semelhago). Were a
party seeks SP w/ and abaitment, the court considers the request on the
standard of the reasonable purchaser, and attempts to discern the intention
of the parties from an agreement which did not contemplate what actually
transpired (11 Suntract). In very rare cases, V may be able to enforce SP
with an abatement where they are able to convey substantially what P
bargained for (LeMessurier v. Andrus).
There are equitable defenses that may be raised by the offending party
when the injured party seeks remedies such as SP these include: the
defenses of laches (Grauer Estate v. Canada), clean hands (Hong Kong
Bank of Canada v. Wheeler Holdings), hardship (Stewart v. Ambrosina
et al, 11110049 v. Exclusive Diamonds), and unfairness (McCorkell v.
McFarlane).
Did Fraud affect the validity of Title?
Once a party is defrauded out of their claim in land, the first thing that
must be discerned is their place in the chain of transactions relative to a
forger or fraudster. Under the immediate indefeasibility system, an innocent
party on title is automatically given good title. However, this is not the
current law (although it was applied to an extent in CIBC Mortgages Inc. v.

11

Chan, but this approach was subsequently overruled in Lawrence vs.

Wright). Ontario purports to have a deferred indefeasibility system,
such as the one applied in Durrani v. Augier, where a person who deals
directly with a forger does not get good title, but where the forgers sells to a
fraudster who in turn sells to an third innocent party, the third party would
secure good title. However, the court in Lawrence essentially created a
double deferred indefeasibility system it their ruling, without
acknowledging that the law had been changed. Under DDI, you can only get
title from an innocent person - if you have title transferred to you by a forger
or a fraudster you do not have good title. However, the court in Rabbie
added that in order to rely on this, you have to have done due diligence.
Then Ratvinsky elaborated saying that if you are a bank, you never win
(DDI plus) in order to rely on DDI, it must be clear that you could not have
avoided the fraud by doing something more. In this case, said that banks can
always do more.
In terms of a lawyers culpability for fraud, a lawyer must be able to
demonstrate they took prudent steps to avoid the fraud such as requesting ID
(Yamada vs. Mock), and they must demonstrate that they were not blind to
suspicious situations/redflags (Shute v. Premier Trust Co).
How do you get out of the deal if you want to?
1. Condition Precedents: I do not want to be bound by my promises
unless certain things occur. The only thing that matters is was it
fulfilled or not.
2. Promissory Condition System: If there is a breach of a big promise
and you are the innocent party, you can get out of the deal you are
relieved of your promises. You can also sue for damages.
3. Rescission: Have to decide whether the misrepresentation is
fraudulent/negligent/innocent. As long as it is before the deal closes
and your client comes to you with a misrepresentation, they can get
out. Once you closed, there is no real remedy except proving fraud.
4. Duty to Disclose: If you discover a big defect before closing, you
could frame it as a promise, or a license for recession. Courts treat
silence as a misrepresentation, and concealment as fraud. Half-truths
are treated like a misrepresentation.
5. Error in Substantialus: It is not clear how this comes into play.
Could say if your not getting anything then that might be a breach of a
big promise, or a mistake.
These remedies relate to external factors, not the contract: No Ad
Idum, Duress, Undue Influence, Illegality, Unconscionability, Mental
Incompetence
****Beginning of regular summary****
Issues Relating to the Enforceability of the Real Estate Contract
Mental Incompetence

12

Bowser vs. Prager [1999] OJ no. 1438 (SC): Established the test for
Incapacity: A party seeking to avoid a transaction on the grounds of mental
incapacity must est. that 1) they were mentally incompetent at the time, and
2) that the other party had actual constructive knowledge of this. There is
also authority for the proposition that where the party does not know of the
incompetence but takes unfair advantage the agreement should not be
enforce.
(Waddams Law of Contracts)
Holding: Agreement enforced he was not so incapacitated that he did not
understand. No one knew of his illness, and the price was fair. However, the
court does not enforce specific performance on the basis that it would inflict
undue hardship on Prager
(SP is an equitable remedy). Awards damages in lieu.
1110049 Ontario Ltd. v Exclusive Diamonds Inc.: It is appropriate for the
court to refuse specific performance if the result would be an undue
hardship to the defendant (equitable remedy).
***Look at hardship at the time the contract was enforced.
McMullen v McMullen (2006): Improvident Decisions do not equate to
Mental Incompetence: Evidence of improvident decisions is not enough
to establish mental incompetence. Law allows ppl to make bad choices,
provided they are capable and their decisions do not harm others.
Banton v. Banton: Duty of Lawyer at Incapacity: Predatory MarriageAn
attorney for a donor who has mental capacity to deal with property is merely
an agent andthe attorneys primary responsibility in such a case is to carry
out the instructions of the donor as principal. As an agent, such an attorney
owes fiduciary duties to the donor but these are pale in comparison with
those of an attorney holding a continuing power when the donor has lost
capacity to manage property.
Stubbs v Erickson: Onus on party who knowingly deals w/
incompetent person: Damages for loss of bargain are not recoverable
where a court exercises its discretion not to award SP in an unconscionable
bargain (Author). Found that the purchasers, who lived next to seller for a
year, must have been aware of her alcoholism. However, the court believed
the purchasers had acted in good faith and did not exert undue influence.
What distinguishes this case from authorities is that seller had legal advice.
The law must place on persons who knowingly deal with mentally
incompetent persons the onus to show that they gained no undue advantage
as a consequence or, at the very least, they did not knowingly gain such an
advantage.
Statue of Frauds
The purpose of the Statue of Frauds is to prevent the possibility of a
nonexistent agreement between two parties being "proved" by perjury
or Fraud. This objective is accomplished by prescribing that contracts not
be enforced unless a written note or memorandum of agreement
exists that is signed by the persons bound by the contract's terms or

13

their authorized representatives. If the defendant can establish that the

contract he has failed to perform is legally unenforceable because it has not
satisfied the requirement of the statute, then the defendant cannot be liable
for their breach. A strict application of the statute of frauds can produce an
unjust result. A party, who in Good Faith believes a contract exists and
therefore spends time and money to perform the contract, would be unable
to force the other party to perform because the agreement was not in writing.
Therefore, courts often employ the term part performance to determine
whether a plaintiff's conduct based on her belief that a contract exists
justifies enforcement of the contract even though it has failed to comply with
the statute of frauds. Part performance refers to acts performed by the
plaintiff in reliance on the performance of the duties imposed on the
defendant by the terms of the contract. The plaintiff's actions must be
substantial in order to demonstrate that he actually has relied on the terms of
the contract. The real test for Part Performance is one of unconscionability would it be unconscionable not to enforce this K in these circumstances?
Deglman v. Guaranty Trust: Leading case in Part Performance: For
acts to constitute part performance in a real estate deal, it must be evident
that the acts unequivocally related to the K for the purchase of the land (can't
be related to some other K).
Erie Sand and Gravel Ltd. v. Seres Farms Ltd.: Guts the Statue of
Frauds. 1)Simply discussing the basis on which a deal may close and asking
the other side to put in in writing could constitute part performance, and the
detriment would be not receiving the land. This is dangerous as it may lead to
enforceable oral contracts that the vendor did not mean to be binding. The
judgment tries to avoid this Pandoras Box by saying it is unique facts having
to do with the right of first refusal. 2) In assessing part performance, it is not
just a plaintiffs actions that are relevant, but also a defendants actions. in
addition to Erie preparing the offer and providing a deposit which Seres
accepted, the steps taken by Seres in delivering the offer to Tri-B (right of first
refusal) also contributed to the finding that there was part performance
(Article)
*** Changed the system: Prove the contract using part performance;
demonstrate a detriment, which can be losing the land. This effectively guts
the Statue of Frauds. They dont admit they are changing the law, but its
good they did bc it was stupid (Carter).
Wallace v. Allen: Test for when letters of intent become binding
contracts: Where a Letter of Intent uses the language of a contract, and a
party can demonstrate part performance based on the terms outlined in the
LOI, the court may find a valid contract existed.
***Undermines the historical use of LOI to negotiate before and agreement is
entered into.
Taylor v. Rawana (1990, Ont): Oral Contracts and Part Performance:
The doctrine was designed to ensure that equity be done where the
defendant has stood by and allowed the plaintiff, to his detriment, to fulfil his
part of the oral contract, and where it would be unconscionable for the

14

defendant to set up the statute by asserting that the contract is

unenforceable so that he might retain benefits which have accrued to him
from the contract.
Tavares v. Tavares (2001, Ont CA): Test of Unconscionability: would it
be unconscionable not to enforce this K in these circumstances (helps
determine what amount and type of part performance is sufficient).
Ad Item
Hunter v. Baluke (1998, Ont): Test for Ad Item (meeting of the
minds): A substantial and essential term of the contract had not been
agreed upon; therefor there was no meeting of the minds (standard =
subjective). 2) A plaintiff who relied on part performance to take an oral
agreement respecting land out of the operation of the Statute of Frauds must
show that the acts by themselves unequivocally refer to a deal with land,
and represent an inequitable detriment to one party to the benefit of the
other 3) There is no general rule that the payment of money cannot
constitute a sufficient act of part performance, however if the payment of
money is to be relied on, it has to be money which I the defendant
has retained and not repaid and had not offered to repay or cannot
repay (the money in this case had been held in trust).
Good Faith
If you have a duty in the contract (promise to do something, like check the
zoning of the land), you must act in good faith in carrying out that duty. If
you breach that duty, you have breached the contract and are liable. There
is no duty to bargain in good faith.
Peel Condominium Corp. No. 505 v Cam-Valley Homes Ltd [2001]
(CA): There is no Duty to Bargain in Good Faith: 1) Purchasers are not
buying paper plates, they are buying real estate, if they do not read the
documents, it is not the job of the courts out bail them out. 2) There was no
misrepresentation because the builder intended, and the time of the contract,
to complete the project as advertised. The builders plan changed do too
unforeseen market pressures, but the changes did not violate the contract. 3)
There is no fiduciary agreement between developer and purchaser.
LeMesurier v. Andrus: Good Faith in Contract Performance: Can the
party substantially perform their promises made in the contract? This ensures
that a vendor/purchaser who seeks to take advantage of a clause which
terminates the contract must exercise his right reasonably and in good faith
and not in a capricious or arbitrary manner. Here, the purchaser was entitled
to take the property with an abatement of the purchase price for an
immaterial deficiency; the vendor could enforce the k as he could convey
substantially what the purchaser had contracted to get. (standard for
materiality = objective)
Illegality

15

Beer v Townsgate I Ltd [1995] (Gen. Div.) & CA: Criteria for declaring
a Contract Void for Illegality: If parties enter into a illegal K with no
intention of complying with the law, its unenforceable. If there is a legal
problem at the time the contract is signed, but the party can demonstrate
their intention to rectify the problem before closing, the contract is
enforceable. Illegality as to factual information must be distinguished from
illegality as to the performance of the contract - public policy favours that
contracts should not be rendered unenforceable merely because of technical
deficiencies.
Duty of the Lawyer
Law Society of Upper Canada: The general rule is that a lawyer should not
act for more than one side in a real estate transaction. However, there are
times when a lawyer will decide to make an exception to the rule, for any
number of reasons. When he or she does so, it is imperative that each party
involved in the deal is informed in writing.
Wong v 407527 Ont. Ltd: Responsibility to the Lawyer for
Contractual Deficiencies: If the parties and the agents sign the contract
and deliver it to the lawyer after it is signed, the lawyer is not responsible for
the flaws in the contract. If the clients wish to extricate themselves from the
deal, then it is the lawyers duty to point out the flaws in the contract.
Identity and Liability of the Purchaser
***Normally, only the parties to the agreement may be the sole persons or
entities that can be sued for breach of contract.
Trust: The trustee is liable should a law suite result, not the beneficiary.
Bare Trust: A bare trust acted as the trustee when an individual or group
wanted to buy property but be protected. Unlike a real trust, the bare trust
did not exercise discretion, but acted as an arm of the beneficial purchaser.
Bc of Trident, Bare Trusts are no longer considered an agency.
Agency Contract: Undisclosed principle is liable unless K is under seal, and
if it is a registered contract you get the benefit of a seal. When you buy a
property as a principles agent, the principle is on the hook.
Privity of Contract: You only get to sue the ppl you deal with; agency is an
exception (many say a stupid one).
Contract Under Seal: A contract under seal does not need consideration,
has a limitation of 20 years, and gets around the undisclosed principle rule
(only the agent can be sued). Gets around the undisclosed principle rule that
applies to trusts where parties not engaged in the contract directly can be
liable. For more on seals see text p. 61.
Business Corporations Act: Outlines the rules regarding contracts entered
into prior to incorporation (see text p. 27), and outlined who can be held
responsible for breach of contract where a corporation is involved (See text p.
30).

16

Obligations of the Vendor: As vendor, it is extremely important to identify

all persons having an interest in the lands. A decree of specific performance
with respect to the totality of the lands may be unavailable if all persons
interested in the land are not bound by the contract. If a purchaser is anxious
to ensure that he or she will get all the lands, a subsearch of title is indicated.
However, a subsearch may not indicate all the interests that must be
recovered.
Trident Case: Guts Bare Trusts: Deals with the Bare Trust concept
employed until the 70s. Apartment bldg. owned by a bare trust with a bunch
of individuals as the interested owner. Electrical contractor sued the
beneficiary owners. The trustee in a bare trust is merely an agent when
entering the contract (not a trustee capable of exercising discretion).
Therefor the EC could sue the beneficiaries.
Friedmann Equity Developments Inc. v. Final Note LTD: Contract
Under Seal: The fundamental difference between contracts under seal and
simple contracts is in relation to the doctrine of consideration. The law
will enforce a contract under seal even without consideration. 1)
Corporate seal equivalent to signature, 2) Mortgages automatically sealed
contract. The court held the contract was sealed, so the beneficial owners
were not liable because they are not part of contract. To abolish the sealed
contract rule would[make] it possible for parties not appearing on the face
of the deed to have rights and obligations under it.
1394918 Ontario Ltd. v. 1310210 Ontario Ltd: Business Corporations
Act: Liability of Persons signing for Unincorporated Company: The CL
calls for both parties to be liable to contract: you can enter into a contract on
behalf of a company that doesnt yet exist and the company can be created
later, but if the company is never incorporated and doesnt adopt that
contract then the person that signed for it is liable. However, The Business
Corporations Act allows for only one party to be liable if a person signs on
behalf of unincorporated company and expressly says in contract that they
are not liable. If the company is never incorporated, there is only the vendor
who is bound.
Wallace v. Allen: Test for when letters of intent become binding
contracts: Where a Letter of Intent uses the language of a contract, and a
party can demonstrate part performance based on the terms outlined in the
LOI, the court may find a valid contract existed.
***Undermines the historical use of LOI to negotiate before and agreement is
entered into.
The Real Estate Agency Relationship
How to Analyze a Real Estate Agent Fact Situation
5) Is there a contract?
6) If there is a contract, are there contractual Fiduciary Duties?
7) If there isnt a contract, are there other Fiduciary Duties?

17

8) Were there any false statements that induced a non-contracting party

to enter into the agreement?
Multiple listing Service: MLS is a locally administered database that
provides information about homes for a sale in a given area, controlled by the
local real estate board. Pursuant to a mls agreement, commission is paid on
the completion of any sale, or in the case of an option, upon exercising the
option (see 11 Suntract for complications). The service also determines the
division between the various participants in a real estate transaction. Today,
the 50/50 split remains, giving the listing agent as much commission as the
agent producing the sale. Before 1993 all agents were working for the vendor
Knoch Estate clears this up.
Overhold Clause: The standard form listing agreement contains a holdover
clause entitling the agent to commission if an offer to buy the property is
ACCEPTED by the seller within 90 days after the listing period expires,
provided that the buyer was introduced to or shown the property during the
listing period.
Current Law: Agents have contract duties, fiduciary duties, and, in some
circumstances, tort liabilities. Tort liabilities are not owed to the vendor, but if
the vendors agent makes representations to the purchaser which the
purchaser relies on, they could be liable in tort even though there was no
contract bn them.
(REBBA Real Estate and Business Brokers Act; RECO Real Estate Council
of Ontario)
Typical Agent Agreements (Listing Agreement and Purchasers
Agency Agreement): Normal situation vendor enters into a listing
agreement. In terms of the purchase, there may not be a formal contract, so
you have to infer from their actions whether the pur was relying on the agent
to look after their interest. It is getting more common for purchasers agents
to insist on a Purchasers Agreement; these types of agreements protect
the agents commission but not so much the purchaser. Most of these
contracts do not outline the actions the agents will take on their clients
behalf, so the law imposes parameters on the legal relationship: duty of a
prudent agent or solicitor (contracts have the option to limit the retainer
within the contract). If there is a dispute, the courts lean towards a finding
for the client.
Duties of the Agent: MLA Doesnt say what the agent will do (only what the
vendor will do i.e. pay commission, tell agent about of interested parties)
Traditionally: law requires agent not to be negligent, but no positive
obligations
Case Law: might be a positive duty on agents to work hard, make efforts to
sell, etc - and if dont they may not get a commission and agreement may be
terminated
Other Possible Fiduciary Duties: Loyalty, Duty to Exercise Care and Diligence,
Duty to Advise on Price Range or Inform Themselves, Duty to advise on
Conditions of Purchase (i.e. financing), Duty of Candour, Duty to Third Parties.
RECO Code of Ethics: Includes duty of confidentiality (Rule 8), Rule Against
Misrepresentation or Falsification (Rule 100), and a positive duty to Discover
Facts, to avoid error, misrepresentation, or concealment of pertinent facts
(Rule 11).

18

Fraud: When we give an opinion on title, there is an implied exclusion for

fraud.
However, the Law Society expects lawyers to be diligent and aware of fraud
schemes that the LS provides information on. For instance, you cannot rely
on certified cheques anymore because they are too easily created.
Misrepresentation: If the agent makes false, negligent, or fraudulent,
makes statements that a client relies upon to enter into the purchase
contract, than there has been a misrepresentation.
Authority of Agent to Bind Purchaser
1) While an agent is given the authority to market the property, they
dont have authority to offer the property (vendor is not making an
offer to the world this is an invitation to treat); the purchaser makes
an offer, and the vendor then decides to accept.
2) Does the agent have the authority to accept an offer made by a
purchaser? The standard is that they do not have the authority to do
so, but it is possible if they are given the authority.
Hunter v. Baluke (1998, Ont): Language used in Accepting and Offer
must be Definitive, and Agent cannot accept and Offer without
explicit Permission from Vendor: An offer was made by P to enter into
terms negotiations, and the agent interpreted that as an offer which was in
the purview of V to accept. Court held that the agent did not use definitive
language that would indicate they were accepting an offer.
Note: What would have happened had there been definitive language? the
court would have to look at whether the agent had the authority to accept an
offer on behalf of their clients (there are marginal cases where the agent has
bound the client).
Luxor (Eastbourne) Ltd. (In Liquidation) and Others v. Cooper (1941)
ALL E.R. 33:
Agents Commission is only Payable upon Closing unless the Vendor
Arbitrarily Terminates: Agent agreed the contract was void due to fraud on
the part of the purchaser, but argued that the vendor cant take any steps
that deprive the agent of their contractual commission - claimed vendor owed
agent a duty to close the agreement and secure their commission. Court
held that the agent only gets commission when the deal closes, not when you
bring someone who is prepared to pay what the vendor asks. The vendor can
refuse to sell. However, if the agent is entitle to a commission on the sale of
a property that they affect, where the vendor arbitrarily terminates the
agreement after it is a binding contract, the agent can sue the vendor. If the
Purchaser arbitrarily terminates the agreement, there is no remedy for the
agent.
Leading Investments vs New Forest: As bn the Listing Agreement
and the Offer, the Listing Agreement Binds/Reasonable Expectations
of the Parties: The purchasers Agreement said that the vendor would pay
the agent for introducing the purchaser, not for closing the deal. However the
Listing Agreement said commission would be payable upon closing. As bn the
Listing Agreement and the Offer, the Listing Agreement binds - the offer has

19

no separate consideration. The court was guided by the reasonable

expectations of the party. In the circumstances of this case for the
respondent broker to succeed in its claim for commission, they were required
to procure a purchaser who at the date fixed for the closing was ready, willing
and able to complete the transaction. It failed to do so. Its claim failed.
Peacock v. Wilkinson and Tinck: Agent has no authority to bind the
vendor without explicit instructions: Series of sales and purchases that
are void bc the original vendor had not signed final purchaser argued the
agent had sold on original purchasers behalf.
Carter: Could have gone the other way - agent made a representation, that
C had the ownership, and breached their obligation by not checking this and
leading A to think he had bought the property.

Toll vs Marjanovic: Agent is a stakeholder holding for both parties if the agent absconds, they cannot go after each other: Vendors agent
absconded with purchasers deposit. Purchasers tried to sue vendor to
recover, but court held that the vendor was not vicariously libel for the
actions of the agent. Whether a RE agent or broker becomes a dual
agent by implication appears to be a question of facts. On the facts of
this case, court concluded that the broker acted as a dual agent for both the
vendor and the purchaser. When the agency receives the money, they
become a stakeholder for both parties
Who do Agents Represent?
Pre-Knoch and Post-Knoch: Pre-Knoch, both agents technically paid by the
Vendor, meaning both agents owed a fiduciary duty to the vendor. This put
the pur at a bargaining disadvantage, and the vendor at an economic
disadvantage. After Knoch, you have to figure out who they have a contract
with, whether oral or written, to determine who they have a duty to.
Knoch Estates v. Picken: Purchasers Agent does not typically owe a
Fiduciary Duties to Vendor An agent cannot serve two principals where
their interests are in such basic conflict as that of purchaser and agent in a
real estate transaction. The purchasers agent may create a situation where
the vendor reposes trust and confidence in the agent to such an extent as to
put the agent in the position of a fiduciary, but hose circumstances were not
present here. If the selling agent does not have any direct dealings with the
vendor, there is no duty
Griffiths: Purchasers agent owes a limited duty to vendor to present offers
and not directly mislead them this limited duty does not give rise to broader
fiduciary duties.
Finlayson: The payment mechanism does not create an agency relationship,
nor does the presenting of the offer create, nor does the MLS agreement.

20

Doherty: Agrees there is no fds duties owed by Picken to the Vendor.

Refuses to use this case to clarify the duties of the purchasers agent to the
vendor.
*** Divergent judgments have not been resolved, so the legal consequences
are still confusing.
Raso v. Dionigi: Dual Agent has a Duty to Disclose Material Facts to
Both Parties: A fiduciary who breaches his duty by non-disclosure of
material facts is not entitled to prove that the transaction would have
concluded had disclosure been made. Since it was not likely that the vendors
would have signed the listing agreement had they known the true facts, the
real estate agent is not entitled to any commission. It also follows that the
purchasers are disentitled to an order for specific performance. Purchasers
not only had knowledge of the agents breach, but also actively participated
in the stratagem designed to secure the property for themselves and the
commission for the agent. Purchasers are disentitled to equitable relief
because they did not seek it with clean hands.
***Equity: Was court influenced by the deviousness of the situation? Agent
brought brother and sister-in-law as purchasers and did not inform vendor of
another purchaser who was willing to pay more.
Note: However, if agent had disclosed the bottom line, they would be liable
to the purchasers. So, Ks need to outline the fact that they are a dual agent,
and what facts they will not reveal
(i.e. Confidential info)
Toll vs Marjanovic: Agent who accepts deposit is a stakeholder
holding for both parties:
The decision in Gray v. Murchison holds that a dual agency can be created
from an agreement to receive a deposit subject to an obligation to return it
where the transaction fails to close. The law on this issue has been somewhat
refined in viewing the agent not as a trustee per se for the purchaser, but
rather as a stakeholder for either the third party or the principal, depending
on who is ultimately entitled to it. Certain consequences would seem to flow
from this state of affairs. 1) The risk of misappropriation of deposits (or other
moneys) or their loss by brokers lies with the parties entitled to the moneys
and not necessarily with the principals, as would in general be the case at
common law. 2) Third parties entitled to moneys held by brokers can sue only
the brokers and not the brokers' principals (unless, of course, it has
wrongfully been paid the principals) for their recovery which, again,
constitutes a change in the traditional position.
3) Trust funds are not available to the creditors of brokers upon their
bankruptcy. Were I to have held that the plaintiffs were entitled to the deposit
monies, it would have been incumbent upon them to seek their return from
the real estate agent or to sue the broker for their recovery
Negligence of Agent
The agent is obligated to act as a reasonably prudent agent. If you fall below
you are negligent. It is a breach of contract to be negligent - there may are
also tort claims.

21

Olsen v. Poirier: An Agent representing themselves as an Expert has

a higher Duty of Care: While it may not have been negligent for a real
estate agent unfamiliar with farm sales to know of this marketing policy, I find
that a person holding himself out to be an expert in the field knowing that a
person will rely upon him, has a higher duty of care than others. I find that
Mrs. Poll, while acting in the employ of the Poll company, made a negligent
misrepresentation and that both she and the poll company owed Olsen a duty
of care. If you hold your self out to be an expert you may be held to a higher
standard than otherwise.
Wong v 407527 Ont. Ltd: Agents can be held Liable for not securing
Guarantees of Rental Incomes that are relied upon by Purchaser:
Purchaser relied upon an unsecured rental guarantee that there would be a
specified rental income for a year. When that did not happen (the tenant left
and the vendor went bankrupt). Agent who had negotiated the contract did
not secure a guarantee was found liable 20% loss, and lawyer liable for 0%
for not trying to secure a guarantee, bc there was no way the vendor would
agree to that after there was a signed agreement.
Mucci v. C.M.F Realty Ltd.: Agent may be Negligent for not knowing
Market Values/Vendors Agent may sometimes owe a Duty to advise
on price to Purchaser: Agents regularly advise vendors on listing prices
and hold themselves out as being able to do so. They have a comparable
obligation to purchasers to whom they owe a duty to advise on whether the
asking the asking price is unrealistically high. If the agent lacks such
expertise or market knowledge, I am satisfied that a real estate salesman has
a duty to warn his principal that he cannot and will not advise on the
adequacy of the price.
11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd.: An
Agents Negligence may disentitle them from receiving Commission
on Closing: The vendor was forced to sell the property at a lower price than
was specified in the Listing Agreement, and that transaction resulted in
litigation due to the agents negligence. The vendors agent was denied
commission because they represented themselves as agents who
specialized in the sale of this type of property. Colliers was required to bring
to this transaction a high standard of skill, care and diligence, which they did
not do. As a result of Colliers' negligence, Chassis concluded an agreement
for the sale that was fundamentally flawed and which resulted in a lawsuit.
Chassis did not bargain for litigation but rather for services that would result
in an enforceable agreement of purchase and sale. Colliers' negligence
amounted to a fundamental breach of contract and the consideration for the
agreement to pay commission failed.
Vokey v. Edwards: The Brokerage is liable for Negligence of its
Agents/Agent Liable for advising to rely on inadequate Warranty
Statement and Failure to Disclose: Purchasers notified agent of wanting
swimming pool, agent recommended against professional inspection, agent
told them they could fully rely on warranty, failed to advise of existence of

22

Disclosure Statement. Warranty in the contract was totally inadequate to

match the reasonable expectations of the plaintiffs and constituted both a
breach of fiduciary duty and negligence in the circumstances. These breaches
by the agent directly led to the plaintiffs signing the agreement to their
detriment.
Fiduciary Duty of Agent
1) Confidentiality: Keep confidential info provided by client (however,
agent cannot lie)
2) Candour: You have to tell your client every material fact that you know
(ie. Raso v. Dionigi purchasers were brother and sister-in-law of the
agent)
3) Loyalty: Cant prefer your interests over the interests of your client - you
cant profit from your fiduciary position (test in law: have to give full
disclosure)
4) Contractual Relationship - K has certain requirements; an agent is
retained to do certain things. Law: agent obligated to act as a
reasonably competent agent on your behalf.
For some relationships, fd are implicit in the relationship (per se
relationships), such as the agency or solicitor relationship. Relationships
where the fd are not so implicit in the relationship but still exist, these are ad
hoc fd. In per se relationships, the fd can be contracted out of. Ad hoc fd can
be imposed by the court if it is proven that the client relied on the agent to
protect their interest. Go through the contractual analysis, and look at fd
separately.
Hodgkinson vs. Simms [1994] (S.C.C.): Enumerates Fiduciary Duties
of Agents/how Fiduciary Relationship is Formed: Liability flows from
principles underlying FD. Fiduciary obligation carries with it not only a duty
of skill and competence; the special elements of trust, loyalty, and
confidentiality that obtain in a fiduciary relationship give rise to a
corresponding duty of loyalty. A party becomes a fiduciary where it,
acting pursuant to statute, agreement or unilateral undertaking, has
an obligation to act for the benefit of another and that obligation
carries with it a discretionary power. Several indicia are of assistance in
recognizing the existence of fiduciary relationships: (1) scope for the exercise
of some discretion or power; (2) that power or discretion can be exercised
unilaterally so as to effect the beneficiary's legal or practical interests; and,
(3) a peculiar vulnerability to the exercise of that discretion or power.
Knoch Estates v. Picken Creating Fiduciary Duties: In general, the
fiduciary relationship arises where one party places a trust or confidence in
another or is dependent on the other in some significant way. Relationships in
which a fiduciary obligation has been imposed seem to possess three general
characteristics: 1) The fiduciary has scope for the exercise of some discretion
or power, 2) The fiduciary can unilaterally exercise that power or discretion
so as to affect the beneficiarys legal or practical interests, 3) The beneficiary
is peculiarly vulnerable to or at the mercy of the fiduciary holding the
discretion or power. Discretionary: It is possible for a fiduciary relationship
to be found although not all of these characteristics are present, nor will the

23

presence of these ingredients invariably identify the existence of a fiduciary

relationship
***See Page 9
Duty of Loyalty
Agent as Purchaser or Vendor: Real estate brokers and agents buy and
sell land for investment and speculation. They require realty for homes and
business premises. They will on occasion buy from their clients. Section 31 of
the Real Estate and Business Brokers Act sets out the statutory minimum for
their dealings in land. Dangers of dealing with clients, even within scope of
statutory strictures, require highest levels of disclosure and
acknowledgement by the client or person to whom a duty is owed.
Soulos v. Korkontzilas: Agent cannot buy property suitable for
Client/Doctrine of Constructive Trust: It is now established that a
constructive trust may be imposed in the absence of wrongful conduct like
breach of fiduciary duty, where three elements are present: 1) The
enrichment of the defendant 2) The corresponding deprivation of the plaintiff
3) The absence of a juristic reason for the enrichment (Pettkus v. Becker).
A constructive trust may be imposed where good conscience so requires.
Court identify four conditions which generally should be satisfied: 1) The
defendant must have been under an equitable obligation 2) The assets in the
hands of the defendant must be shown to have resulted from deemed or
actual agency activities of the defendant in breach of his equitable obligation
to the plaintiff 3) The plaintiff must show a legitimate reason for seeking a
proprietary remedy 4) There must be no factors which would render
imposition of a constructive trust unjust in all the circumstances of the case.
Court awarded constructive trust without demonstrating unjust enrichment.
Entitled to the property even though the reason for wanting it was completely
subjective.
Note: Agent found a property that suited his clients needs and then decided
to buy it for himself. When client asked what happened to it, agent said dont
worry about it. Court said that S gets the property for the amount that K paid
for it. K wins cause he gets his money back, but the property had
depreciated, so S pays more than the property worth. Constructive trusts are
not only based on an unjust enrichment, a way of enforcing the agents
duties, making them do what should be done in the first place
Carter: What if the vendor says I would have taken less if they had come
back and made a counter offer, and client says theyd buy it back for less?
Open for a court to say we cant figure out what you would have done, but
we can create a number for the lost opportunity completely arbitrary.
Phillips v. R.D. Realty Ltd.: Where there is a breach of a Fiduciary
Duty, client must show Damages: P assert that they are entitled to claim
the Ds profit on the resale of the property and allege that failure of the D real
estate agents to disclose that they were acquiring an interest in the property
constitutes a breach of fiduciary duty giving rise to an obligation to disgorge
the profit. Holding: Parties seeking recovery must prove that they
have suffered damage. Absent proof of actual damage the causes of action

24

will fail. In my view the appellants have suffered no damage from the alleged
breach of contract and the alleged conspiracy and their claims based on
these causes of action were property dismissed.

Duty of Candor
The agent is under an obligation of candour to his principal and he is bound
to disclose all facts to his principal.
Duties to Third Parties
In the past the concept of duties to third parties has primarily meant duties
to purchasers. The field is now complicated by the fact that certain
purchasers may, in fact be principals. Generally, because the duties to
principals are more extensive, the range of responsibilities to third parties
has been expanding. The Hedley Byren principle has been used to fix liability
on listing agents who misdescribed or misrepresented the property, the title,
or zoning.
Ocean City Realty Ltd. v. A & M Holdings Ltd. (1987): Test for
Disclosure/Candor: A real estate agent's duty to his principal is to be
construed strictly. The onus is on the agent to show that he disclosed
everything known to him respecting the subject-matter of the contract which
would be likely to influence the conduct of his principal. The onus is not
confined to those instances where the agent has gained an advantage in the
transaction or where the information might affect the value of the property,
or where the agent is in a conflict of interest with his principal. The test is
an objective one to be determined by what a reasonable man in the
position of the agent would consider, in the circumstances, would be
likely to influence the conduct of his principal. The agent cannot
arbitrarily decide what would likely influence the conduct of his principal. Any
doubt that the agent may have can be readily resolved by disclosure. Given
that the agent failed to satisfy the onus on her to justify her failure to fully
disclose the vendor was not required to give evidence of the effect such nondisclosure might have upon it. The agent breached her fiduciary duty and as
a consequence was not entitled to the commission claimed.
Knoch Estates v. Picken: Purchasers Agent has no Duty of Candor to
Vendor, but cannot make Misrepresentations ***See Page 9
Conditions in the Agreement of Purchase and Sale
Remedies: The court attaches certain remedies automatically, but a welldrafted agreement can overwrite these remedies and substitute their own.
Conditions, Representations, and Warranties
Rescission v. Repudiation

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Rescission: right of an innocent party to rescind the contract because of a

misrepresentation. Put in the position as if the contract never happened.
Purchaser can rescind for any misrepresentation provided it is a
false statement that is (1) material, (2) relied on by purchaser, and
(3) induced P to enter into the K. If you find out about misrepresentation
before closing you can rescind. If you do close transaction you can still
rescind for a fraudulent misrepresentation, but not for an innocent or
negligent misrepresentation. Purchaser can also rescind K for various other
things: undue influence, duress, non est factum, breach of fiduciary duty,
illegality.
Repudiation: Arises from failure of a party to fulfill a condition; the innocent
party has an election: 1) they can try to hold the party to the bargain, or 2)
they can accept the repudiation and terminate the contract (put in the
position if there hadnt been a default). Sometimes drafted as termination of
rights rather than conditions precedent if I dont get financing by certain
date I have right to terminate the K and get deposit back
3 Main Contractual Terms:
Promises (including warranties): What you say you are going to do.
Representations: Statements as to a state of affairs that are intended to
induce the party to enter into the contract.
Conditions: A set of events that must exist before a party is bound by its
promises. You are not bound by a promise until a condition is satisfied
(obtain financing).
Promises
.Promissory Conditions: big fundamental promises in the agreement.
These are so integral, the court considers them a condition rather than a
warranty.
a. Subject to one of two Pre-Closing Remedies:
Accept Repudiation, you are relieved of your promise, and sue
for damages.
Not Accept and sue for Specific Performance or Specific
Performance with an abatement (damages)
b. Post-Closing Remedies: Sue for damages for promises that did not
merge
If you discover a breach after closing, you must determine if the
promise merged upon closing (merger means that when you register
the deed, the deed effectively says that I accept the property as is and
cannot sue on any promises). Court has determined that merger is a
matter of intention did the parties intend to have the promise carry
on after closing? Normally the courts find the promises did not merge
on closing. Covenant, warrant, promise, agree, are the word of promise
in the agreement.
.Intermediate Promise/Warranty: cant tell if this is a condition or a
warranty on the day the contract was signed. Need to wait for events to
happen to make the determination. This is a problem for lawyers because
the other side breaches the contract before closing, your client asks for
advice, what do you do? You need to determine if it is a fundamental or
non-fundamental promise.

26

.Warranties: Smaller promises in the agreement. When smaller promises are

breached, you must close, but you can sue for damages
Note: You can make a promise that you are not currently able to fulfill.
Representations: statement as to a state of affairs that is intended to
induce the party to enter into the contract
1. Innocent Representation: Not a fraudulent representation would have
different remedies than a fraudulent representation. You cannot sue for
damages for an innocent representation before or after closing. You only
recourse is rescission.
2. Negligent Representation: You were reckless about making the
representation; should have looked into it further. You can claim
rescission or damages before or after closing.
3. Fraudulent Representation: You know you are lying and you intend to
deceive the other side. You can claim rescission or damages before or
after closing.
Pre-Closing Remedies: If you discover ANY incorrect representation before
closing, you can refuse to close. It must have been a material
representation, you must have relied on it, and it must be false. The law
says Rescissions applies: that you relied on that representation to enter into
the contract, so if the representation is incorrect, time is unwound and made
as if you had never entered into the contract. Remedies depend on whether
you close the deal or not. After closing, if you discover there was a
misrepresentation, you can only rescind if it is a fraudulent
misrepresentation.
Puffs: Marshall vendor says to purchaser this is a perfect house, this is a
puff, there is no such thing as a perfect house. Even though there was no
guarantee for a puff, it tempered the case. Court can interpret it as a
representation, can use it to temper depends on what the courts want to
achieve.
Conditions: A set of events that must exist before a party is bound by its
promises. You are not bound by a promise until a condition is satisfied
(obtain financing). Fundamental promises, whatever is fundamental to the
contract, if there is a breach of a condition, the innocent party has an
election: elect to accept the repudiation, or elect to enforce the contract
(specific performance). The innocent party is relieved of the duty to fulfill
their promises.
1. True Condition Precedent: Based upon the will of a third party. Have to
go to the municipality to get consent. If the condition is not met, the deal
is off and the condition cant be waived. If you dont get planning
consent, you cannot sever your property. The parties cant contract
because you cant waive the condition (cant have a contract without the
condition being met.) Cannot be waived, Discretion of third part, benefit
of both parties, you are obligated to make a good faith effort to fulfill the
condition.
2. Condition Precedent: You can waive a condition that was for your
benefit only. Still may depend on a third party.
***The different bn a true condition precedent and a condition precedent is
only waiver

27

***Representations and promises are very similar, but not interchangeable.

Provided and on condition that is the language of a condition in a contract.
Lawyers may use all the language (covenant, represent, warrant) to try and
have all types of damages apply should the deal go bad.
Fulfilling Conditions: Current language includes satisfied to my sole and
absolute condition, but the court still finds an embedded promise to act in
good faith.
Fraser-Reid v Droumtsekas: Courts Discretion in Interpreting
Contract (Promises): Court concluded that there were no promises as to
the quality of the house, but relied on the clause stating that the vendor must
disclose to the purchaser all outstanding infractions of the municipal
standard. Language = provided that usually means a condition
precedent, but may be a warranty in the fact that it is a lesser
promise, the breach of which can lead to remedies but not recession.
Read the provision as an undertaking or promise to disclose to the vendor all
infractions. When the vendor did not disclose their failure, the purchaser was
deprived of their right not to close, which generates a damage claim. So, the
purchaser does not have to close the deal if there is an infraction with the
municipality. Court essential morphed a condition of closing into a
promise.
Notes: There were pre-existing implied CL warranties in existence: it is
inhabitable, made in a good and workmanlike manner, and made of new
materials. However, the house was finished when it was bought, so the
implied warranties were not applicable.
***At about this time, the government created Terion program where
promises are statutorily imposed on new homebuilders.
Jorian Properties Ltd. v. Zellenrath: Intention and the interpretation
of Conditions: Plaintiff now argued it was based on a breach of a condition.
Looked at the intentions of the parties was the 5-plex of critical importance?
Because the purchaser settled with the new purchaser, it appears the
property was what was important to the plaintiff, not the characteristic of a 5plex. The purchaser should have closed the deal and sued for damages. As it
stands, the purchaser was in default and cannot claim damages.
Note: This was an unpredictable outcome should advise clients to
close and sue for damages, which is safer than later arguing it was a
big promise.
Conditions vs. Contingencies
Conditions Precedent: A set of events that must exist before a party is
bound by its promises
Promissory Conditions: Big fundamental promises in the agreement.
These are so integral, the court considers them a condition rather than a
warranty.
True Condition Precedent vs. Condition Precedent
Turney v. Zilka: What constitutes a True Condition Precedent? 1) Does
it benefit both parties, 2) and does it depend on a third party. If it meets

28

these criteria, then until the event occurs, there is no right to performance on
either side because no contract exists until the condition is fulfilled. A true
condition precedent cannot be waived, even though it is in favour of one
party only and the fulfillment of the condition is completely w/in the control of
that one party.
Note: The court has found a condition precedent where no third party was
involved. The scope of the holding in is uncertain, as later cases have sought
to limit its impact bc in some situations, it is bound to produce absurd results.
Beauchamp v Beauchamp: Fulfilling a Condition Precedent: A
condition precedent doesnt need to be strictly fulfilled, as long as party for
whos benefit the condition exists is satisfied that it has been fulfilled. Case is
unclear regarding whether this was not a true condition precedent, or
whether the purchaser had fulfilled the condition.
Barnett v Harrison: Court Affirms Turney v. Zilka: Raised the
question as to whether a contracting party may waive a condition of
the k on the ground it is intended only for his benefit, and then bring
an action for specific performance. Applied Turney v. Zilka, and upheld it
on the grounds that: 1) if the court allows a party to waive true conditions
precedents (which should void the contract), then the court is basically rewriting the contract 2) Removing the rule would allow ppl to speculate on real
estate 3) Application of the rule in Turney v. Zhilka may avoid
determination of two questions which can give rise to difficulty (i) whether
the condition precedent is for the benefit of the purchaser alone or for the
joint benefit and (ii) whether the conditions precedent are severable from the
balance of the agreement 4) The rule in Turney v. Zhilka has been in effect
since 1959, and has been applied many times. In the interests of certainty
and predictability in the law, the rule should endure unless compelling reason
for change be shown.
Parties can contract out of Turney v. Zhilka: This case gave the SCCs
seal of approval to a simple and practical way of getting around the
difficulties of the Turney v. Zhilka situation. A party can contractually provide
that a condition is inserted for the partys sole benefit and that the party
reserves either expressly or by necessary implication the right to waive the
condition that was inserted in the partys favour. The courts have regularly
given effect to such provisions.

Duty to Act in Good Faith to fulfill a Condition

Marleau vs. Savage: Good Faith Test: As long as you act reasonably to
fulfill the condition, you have satisfied your obligation. Must use best efforts
and act in good faith. Mrs. Savage relied upon her consultants, and it was
reasonable to do so, so she was reasonable to rely on their advice not to
precede any further. The test is not how another purchaser might have

29

acted, but did this purchaser act reasonably in light of their expert
consultant. Mrs. Savage acted in goof faith to discharge her obligation.
Chan v. Hayward: Reasonable Efforts: It is the "subject to financing"
clause that causes all the problems in this instance. While the word "waiver"
is used in the agreement, the doctrine of waiver is not strictly
applicable because neither party is giving up a right to insist on the
performance of the contract according to its original tenor. Instead, each
covenanted with the other to allow the plaintiffs the right to "elect" whether
they would complete if the plaintiffs got suitable financing. The parties orally
agreed to change the terms of the written agreement by allowing the
purchasers an additional period to acquire the money. Because no fixed date
was set, the purchasers had up to the completion date. At some point, the
purchasers did tell the vendors they could not get suitable financing and so
the sale came to an end. Having made reasonable efforts to acquire the
money, the law required them to do no more. Since they did not
default under the terms of the contract, they are entitled to return
of their deposits.
Duty to Satisfy Self
Flack v Sutherland: Reasonable Person Test for Satisfaction: The
correct test in asking whether the financing sought to be obtained was
satisfactory to a reasonable person with all the subjective but reasonable
standards of the respondent. Agreement conditional on purchaser obtaining
75% financing. The respondent had made his best effort to obtain financing
and had acted in good faith. There was no obligation on the part of the
respondent to accept the vendor's offer of financing. This would have
constituted a new agreement to which the respondent was not bound.
Marshall v Bernard Place: Contractual Discretion & Good Faith:
Contract applied the standard of sole discretion, but at the very least you
have to act honestly and in good faith even if it is completely subjective. No
contractual discretion is absolute you cannot arbitrarily exercise discretion.
Test for Discretion: Discretion has to be exercised on the basis of the event
supporting the condition. Once the issue you are upset about falls within
those criteria, then you can be as subjective as you want to be. First
objective analysis, then subjective analysis based on the language of the
contract.
What is being Bought and Sold in a Real Estate Transaction?
Fixtures and Chattels
Futures are real property, chattels are personal property
Chattels can become property if attached to the real property
Chattels can remain chattels if they are attached to the property
Fixtures can become chattels if detached from real estate, so long as it
does not affect third parties.
You can find cases going both ways very little guidance from the law

30

S. 15 of the Convincing and Law of Property Act

Conveying includes: house, outhouses, barns, gardens, fences, etc.
Seminal to litigation regarding whats included in conveyance
Chattel vs. Fixture Test
1. Degree of Annexation how attached is it to the real property?
2. Intention or Purpose of Annexation (was the intention to make the real
property work better, or to make the chattel work better)?
3. Constructive Fixture and Constructive Chattels ex. the light bulb in a
light fixture is a chattel included to make a fixture work better, therefore
it becomes part of the fixture
Stack vs. Eaton:Test for distinguishing a Chattel from a Fixture:
1. If it is attached by its own weight, its a chattel, unless the parties
intend it to be a fixture.
2. Even if it is affixed even slightly, then it is a fixture unless the parties
intended it to be a chattel.
3. Finally, the intention is to be presumed by the degree and object of the
annexation.
***The circumstances showing the intention of the parties has to patent from
the thing itself (must be able to look at it and know why it was attached).
Facts: Landlord tenant dispute regarding removal of tenant improvements.
Royal Bank of Canada vs Neilson: Degree of Permanent Annexation:
Court applies Stack v. Eaton test to a trailer on land where the owner was in
bankruptcy and the mortgagee argues that the mrtg applies to the trailer and
the land. Court finds that if you wanted to remove the trailer you could do so,
but the court decided that even though it is only attached by its own weight
they are not going to presume it is a chattel. Found a degree of permanent
annexation, and granted the real property to the mortgagee.
Atlin Air v. McHeffey: Permanent Annexation vs. Occasional
Annexation: Yukon Air owns land where they service and land planes in NW
territories. They rent a trailer for their pilots accommodations. They sell the
property to Atlin Air who assumes they now own the trailer. When they do
not pay the rent, the owner of the trailer contacts them and they refuse to
pay. During the winter the owner of the trailer seizes the trailer and destroys
the lean-to that had been attached. P has the obligation to demonstrate
permanent annexation. Court held that the trailer was not permanently
annexed to the real property (despite the fact that a lean-to had been built
and the wires buried). They felt it was more unfair for the owner of the trailer
to lose his trailer bc of the problems bn the pur and ven.
Legal Description
Most Agreements use the municipal address, and at least part of the legal
description: metes and bounds description uses feet and inches and
describes based on the bounds of a concession, or use the instrument
number or PIN, or attach a survey/reference plan
Test/Language:
More or Less covers small deficiencies in size descriptions

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What you saw is what you get important for urban properties, are
you getting what you bargained for?
If you are buying a property based on quantity, then the court has the
option to enforce a price abatement
Pur can take what the vendor has with an abatement (the vendor does not
have the right to force the pur, unless the vendor can give substantially what
was bargained for like LeMesurier)
Dynamic Transport: Where the Property is Badly Described, the
Court can look at the Intention of the Parties: Description of the portion
of the land being bought was so badly described the court could not
determine what was being purchased. Court decides to look at the parties
intention and the surrounding circumstances. The lot was shaped so that
there was a discernable 4 acre portion, but it dissected the barn. As such,
they used the more or less language to move the boundary slightly to keep
the barn intact.
Turney v. Zhilka: A Contract which does not Communicate the
Intention of the Parties is not Enforceable: vendor offered 60 acres, but
intended to retain 5 acres where their house was situated. When a new
survey was conducted, they could only sell 62.75 acres. Purchaser claimed a
breach of big promise and sued for specific performance. Referred the deal
to a master to try and figure out what the parties agreed to, and could not.
Referred back to the judge, who allowed the vendor to retain ten acres at
the time, if the vendor kept ten acres you did not need consent for a
severance. The pur was now getting 52 acres for the price of 60, but was
happy with the judgment because the value of the land had gone up. The
vendor appealed the decision bc he wanted to make more money on the
land, and was successful the court could not figure out what the deal was,
and therefor no one was bound by the contract.
Murphy v. Horn: More or Less does not cover Misrepresentations or
Substantial Difference: general principle: where a misrepresentation is
made by V to a matter within his knowledge, and even though it may be
founded on honest belief in the truth of the representation, and P has been
misled by such misrepresentation, P is entitled to SP, so far as the vendor is
able to do so, and to have compensation for the deficiency. In sale of land
when quantity is stated and the price is stated in a lump sum the
presumption is that the price was fixed with reference to the quantity. In the
absence in the case now before the Court of any description by metes and
bounds from which the purchaser could have checked up the quantity for
himself, I think the words more or less are not to be construed as the
equivalent of as estimated, or as supposed, but are construed to mean,
about the specified number of acres, and as designed to cover small errors
as sometimes occur in surveys. The deficiency in the present case amounts
to substantially the difference between acres and arpents, or 16.5 per cent of
the quantity of land. Entitled to an abatement of the purchase-price on that
basis, that is to say 16.5 per cent of $16,000

32

Wilson Lumbar Co. v. Simpson: Application of You Get what you

See: Unlike Murphy v Horn, the vendor did not know there was an error in
the dimension. In the case at bar, though the lot is not described by its
number, it is by the house number. The words more or less control that
statement, so that neither party would be entitled to relief on account of a
deficiency or surplus unless in case so great a difference as will naturally
raise the presumption of fraud or gross mistake in the very essence of the
contract and upon the facts of this case no such presumption is raised. Ps are
not entitled to compensation, but if they choose to take what the D owes,
they may have judgment for SP without costs. If you couldve went to the
land registry office and figured it out you wouldnt get an
abatement.
Pompeani v. Bonik Inc.: Deference to Clear Descriptions in the
Agreement: It seems to me that the fact that the plan specified the area of
the lots provides further evidence of the considerable clarity and specificity
w/ which the lots were described. Further, the fact that the area has been set
out makes it difficult to accept that the parties intention was that the
frontage dimensions could be reducedThe subject-matter of the agreement
was not lots upon which 16 townhouses could be built, as the tj found, but 16
lots conforming w/ the frontage dimensions as set out in the plan. Whereas
here, the agreements provisions are clear, they should not have been
ignored. The breach was not innocent; it had economic consequences
quantified by the tj at 350k breach warranted termination of the agreement.
Interest of Parties Pending Closing Issues of Risk
What are the duties after the agreement is signed
Equitable Conversion: When you enter into a contract to purchase a house,
the purchaser immediately becomes the owner of the house and the vendor
is their trustee. Originally EC occurred when pur accepted vendors title.
Today, contract promises good and marketable title, so the SP remedy is
available when the agreement is signed. Agreements try to reverse EC by
saying that until closing, V is at risk for losses. EC was developed by the
courts of equity to ensure SP was an available remedy. EC gets cancelled if
the pur walks.
Equitable Conversion Interpretations
There are at least 3 ways in which to look at the situation:
1.
The property analogy: After the agreement of purchase and sale is
signed, the V retains the legal title to the land, but P becomes the
equitable owner of the land
2.
The trust analogy: After the agreement of purchase and sale is signed,
V becomes the trustee of the land for the beneficiary P
3.
The contract analysis: After the agreement of purchase and sale is
signed, P acquires contractual rights in the land, which may be
enforceable by specific performance.
Concepts in the Equity Courts: Trust Law: X holds legal title and Y holds
beneficial title; Mortgages at CL: A mrtg is a legal conveyance to the lender
(really a legal fiction no one would ever say the lender owns the house. The
fiction was abolished in the 1980s, but the remedies that arose out of it still

33

exist: foreclosure/possession); Vendor Lien: Created so that P, under

equitable conversion, does not fully own the house until they pay the
purchase price. This is an unregistered mrtg on title, and things can get
messy if the balance is not settled on closing. V can register this interest to
protect themselves if a second purchase is made, bc that P is a P for value
w/o notice, and they would not be responsible for the V lien.
Background to Equitable Conversion: A long time ago, if you had a
contract for real estate, if the V went into another contract the priorities were
whoever completed the contract 1st. When we brought in the registry system
it became, the first one to register wins. Actual knowledge if the second
purchaser knew of the first purchaser they couldnt take title. Then we
brought in land titles land titles reversed it again saying actual knowledge
doesnt apply (this isnt the case in Ontario though). To get around the
common law, courts of equity created trusts, says P is the beneficiary and V
is a trustee

Agreement of Purchase and Sale

Insurance: all things being purchased shall remain until completion at the
risk of the Vendor . . . in event of substantial damage, P may either terminate
agreement or take insurance proceeds this language is standard in every
agreement. The parties by contract say they want the practical impact
of the equitable conversion to be reversed. The language means
virtually nothing b/c it has to be read with the rest of the clause, creates a
limited right for P to get out of the deal or take insurance proceeds.
Problems: no test for substantial damage. Insurance is b/t V and insurance
company. V does not have to provide P with what insurance there is. Who
pays the deductible?
Solutions: P could get own insurance. There has to be an interest in
the property to obtain insurance (equitable interest is enough).
Advise client of risks and recommend insurance, esp. in commercial.
Equitable Conversion
Lysaght v. Edwards: Establishes Equitable Conversion: The moment
you have a valid contract for sale V becomes in equity a trustee for the
purchaser of the estate sold, and the beneficial ownership passes to P, V
having a right to the purchase money, a charge or lien on the estate for the
security of that purchase-money is paid, in the absence of express contract
as to the time of delivering possession. If anything happens to the estate
between the time of sale and the time of completion of the purchase it is at
the risk of P. If V willfully damages or injures it, he is liable to P; more than
that, he is liable if he does not take reasonable care of it.
Rayner v. Preston: A Contract for Insurance Does not run with the
Land: Before closing, property was destroyed by fire P closed and sued for
insurance money. However, the parties to a contract of sale and purchase are
the only persons the Court of Equity will, under certain circumstances, decree
a specific performance. The contract of insurance is a mere personal contract

34

for the payment of money. It is not a contract which runs with the land. If you
want to get the benefit of a contract you need to get an assignment. V got
the insurance proceeds. The court didnt think he should get the proceeds;
the insurance company sued V to get back the proceeds and won.
Mortgage law
Equity transfers the legal title to the lender and the borrower holds the
equitable title. The lender has a charge obligated to deliver possession/title
back to the borrower. When V gets purchase price they are obligated to give
the title. The vendor has a charge on the property for the unpaid purchaser
price.
The Contract Provision
Wile v. Cook: Utility of the Contract Provision in reversing Equitable
Conversion: Significantly alleviates the harshness of the common law. Under
that provision, the buildings and equipment remain at the risk of V until
closing. All the clause provides for is that if P elects to go through with the
purchase he is entitled to whatever insurance proceeds may be owing. It does
not give P any guarantee that the insurance is necessarily collectible. The
SCC implied a term of contract that the closing date will be extended for a
reasonable time to find out what the insurance is and also said that they
need to tell P what the insurance is. The case is perfectly reasonable.
Vendors Duty
Abel v. McDonald: Deceit and fraud can create an A-Typical liability
for V: unanimously conclude the evidence and the record in the absence of
any explanation from V, is sufficiently compelling, not only to support but to
warrant a finding of fraud through the active non-disclosure on the part of V.
There was also a specific clause stating that the property was at the risk of V.
appeal is allowed with costs. V is not responsible for the damage, if damage
is substantial they have normal election of options. Deceit prevented P
from exercising their rights under contract. They could have cancelled
the deal and may not have closed. In this case they had to pay P after closing
the cost of repair. Even if it was a small problem, V would have had to pay.
But if they hadnt been deceitful they would have had no liability.
Lichtenberg v. Johnstone et. Al.: Discretion of the Courts/V liable for
leaving property Vacant: Action arises out of an agreement of purchase
and sale of a home. V moved out 3 weeks before closing, house left vacant.
Floor tiles in the rec room lifted. Contract provided that all buildings on the
property and all other things being purchased shall be and remain until
completion at the risk of V. Having abandoned the property, V placed
himself in a position of not being able to use reasonable care for the
preservation of property. The case was argued on substantial damage. The
case is there to show how ridiculous the courts can be when attempting to
get around equitable conversion and imputing a duty on V. Using tools to hold
V liable.

35

What falls under the risk (title) clause?

Risk Conversion/Substantial Damage Clause: If there is substantial
damage to the house before closing, then P can, by contract, get out of the
deal or close the deal and take the benefit of Vs insurance (if any). However,
not every risk is flipped to V.
Loewen v. Neumann: At risk of V Clause is at least a Warranty
extended by V for the benefit of P: P is entitled to rely on it to sue for
damages. According to the terms of the agreement, P was entitled to receive
water on the possession date, that was of the same quality as existed when
the interim agreement was signed. Normally, purchaser would be responsible
for change to property that occurred through no fault of vendor. But, need to
consider substantially the same condition at possession date - clause does
not apply directly (refers to buildings and other items included), but shows
intention of parties to hold vendor responsible for improvements. Might be
condition, but more likely warranty for benefit of purchaser.
V. Rankins Mechanical contracting Ltd. v. First City Developments
Ltd.: Vendors Duty of Care: The basis for finding an obligation on V in the
ordinary real property transaction is the fact that he is in possession and has
control of the legal estate and will benefit from the completion of the sale and
therefore he has a responsibility to see that P gets what he paid for subject to
ordinary wear and tear and risks over which V has no control; this imposes on
V an obligation to take reasonable care of the premises pending completion.
In the absence of an express agreement that the property is at the risk of V
pending closing, then, pursuant to the common law, the property is at the
risk of P. But this does not mean that P is responsible to care for the property.
There is a duty for V to take reasonable care of the property pending closing.
Vendors Liens
Silaschi vs. 1054473: What is a Vendors Lien: A vendors Lien is a very
powerful remedy set up by the courts to get around equitable conversion.
This Lien arises when the agreement is signed, and is for the entire purchase
price. It can be enforced like a mortgage. The agreement said V would get
part of the purchase price on closing. V gets a vendor lien in 1 st position. They
got a vendor take back mortgage in 2nd position. V knew that P was getting a
construction loan. Property was sold for $120 and there was a 20000
shortfall to pay back. The vendor agreed to be in second position when their
vendor take-back mrtg was registered in second position. As such, vendor
does not get their money out of that second deal bank takes priority.
Essentially, the VTB mrtg postposed V lien in 1 st position.
Physical Defects
Caveat Emptor
A warning that notifies a buyer that the goods he or she is buying are "as
is," or subject to all defects. When a sale is subject to this warning the
purchaser assumes the risk that the product might be either defective or
unsuitable to his or her needs.

36

This rule is not designed to shield sellers who engage in Fraud or bad
faith dealing by making false or misleading representations about the
quality or condition of a particular product. It merely summarizes the
concept that a purchaser must examine, judge, and test a product
considered for purchase himself or herself.
The modern trend in laws protecting consumers, however, has minimized
the importance of this rule. Although the buyer is still required to make a
reasonable inspection of goods upon purchase, increased responsibilities
have been placed upon the seller, and the doctrine of caveat
venditor (Latin for "let the seller beware") has become more prevalent.
Generally, there is a legal presumption that a seller makes certain
warranties unless the buyer and the seller agree otherwise. One
such Warranty is the Implied Warranty of merchantability. If a person buys
soap, for example, there is an implied warranty that it will clean.
If both the buyer and the seller are negotiating from equal bargaining
positions, however, the doctrine of caveat emptor would apply.
Laskin Quote (McGrath vs. McLean)
Caveat Emptor: Absent fraud or misrepresentation, you take the property as
you find it. You can also meet your duty or contract out of your duty to
disclose latent defect in the contract.
Duty to disclose and duty to warn.
So often with the duty to disclose, parties will allege that silence amounts
to fraud or misrepresentation.
PROFESSOR: Duty to disclose is a contractual duty, currently sort of a tort
duty of fraud/misrepresentation as proposed by Laskin.
There is conflict between whether this duty to disclose is based in tort or
contracts.
Exceptions to Caveat Emptor
1) Contractual Warranties
2) Common law implied warranties: In certain circumstances purchaser has
guarantees about the quality of the property implied into your K
3) Statutory warranties: apply only to new homes.
4) Misrepresentations: Misrepresentation is a tort claim. Doesnt matter if
defect is latent or patent if you have a misrepresentation.
5) Active concealment: Theory here is that vendor has converted a patent
defect into a latent defect. Akin to fraud worst thing vendor can do. If
you find a defect has been concealed it doesnt matter if its latent or
patent its fraud
6) Silence amounting to misrepresentation: Patay v. Hutchings: Ps agent
knew this person was buying this house b/c this house was clean and
health. So knowing purchaser had particular proclivity, silence can be
misrepresentation if you dont correct misunderstanding. That is a hard
test.
7) Error Insubstantialis: Substantial error or mistake such that purchaser is
not getting what she bargained for.
8) Latent vs. Patent Defect
Latent vs. Patent Defects

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***If there is concealment, fraud, or misrepresentation, a warranty,

or a promise about the condition/item, you do not need to discuss
whether they are latent or patent.
Latent Defects: A fault in the property that could not have been
discovered by a reasonably thorough inspection before the sale.
Sellers are obligated to disclose material latent defects that they are aware
of, but buyers are expected to discover patent defects on their own. You have
to disclose a latent defect that makes the house:
1. Unfit for habitation
2. Dangerous
3. Health or Safety Hazard (this includes defects in the neighbourhood etc.)
4. Reasonable purchaser finds material (this is probably not a test, but there
is some indication in the JP that this 4th defect is being developed).
If the latent defect just goes to the value of the property, you do not have to
disclose it (i.e. a death in the property). These include:
1. Goes to the value of the property
2. Immaterial
3. Should have been detected by the purchaser but wasnt.
4. Things you have taken steps to remedy, and as far as you are aware,
have been remedied
Patent Defects: Those defects that can be discovered by conducting a
reasonable inspection and making pertinent inquiries about the property. You
never have to disclose a patent defect.
Other Issues: What if you know that there is a defect, which will manifest in
the future (i.e. must replace the roof in 5 years)? If there were a defect that
you temporarily fixed, the court would most likely find that you concealed the
defect. However, if you did the repairs long before you listed the property,
you did not intend to defraud the purchaser.
Before you even get into a defect, you have to establish that the
vendor know about this danger (likelihood).
Protections in Contract:
1. Para. 13 inspection clause acknowledge and opportunity to inspect
(walk around inspection before signing) to discover defects
2. Para. 25 entire agreement clause 3. Condition on inspection clause after signing, there has to be an
objective basis (broken window sill), and then you can be subjective on
whether you find it satisfactory or not ($1 million house, $1,000 repair,
walk away)
4. UFFI warranty
5. Warranty about particular matters add in whatever you want (no bats in
attic)
6. Representations about particular matters
McGrath vs. McLean: The is no Duty to Disclose Latent Defects which
V was not aware of: The vendor could not have anticipated the tortious act
of a third party, and there was no knowledge that the vendor could have
anticipated such a catastrophic landslide (did not know about the potential
danger). This is a legitimate ground to circumvent their duty to disclose.

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Obiter: If V knows of a latent defect, which renders the property unlivable

and makes false representations regarding the defect, assuming they are
aware of the potential danger (higher standard that theoretical), there may
be a duty to warn about dangerous circumstances. Generally, vendors will
not be held liable for latent defects discovered by the purchaser after closing,
if the vendor was unaware of these defects in the first place. The only
exception to this principle appears to be if the transaction involved the sale of
an uncompleted home.
Notes: Court says little landslides are possible on this site, but they find no
liability because: 1) it is tortious/criminal 2) the vendor had no knowledge of
this type of danger. Number 2 could also have been argued that this danger
was too remote.
Winnipeg Condominium Corp v. Bird Construction: A Purchaser who
takes reasonable steps to Inspect is not liable for defects due to
Contractors Negligence: Contractors and builders, because of their
knowledge, skill and expertise, are in the best position to ensure the
reasonable structural integrity of buildings and their freedom from latent
defect. The Condominium Corporation acted with diligence in seeking to
detect hidden defects in the building, they were nonetheless unable to detect
the defects or to foresee the collapse of the cladding in 1989. It is not
unreasonable to expect the constructor to envision a multiplicity of owners. It
is further reasonable that the builder should have the safety and health
of all these owners in mind.
Decided in large part due to Policy Considerations: 1) Often latent defects
do not manifest until after purchaser has sold the property, 2) increasingly
mobile people buy and sell more often, 3) original buyer not always in a
position to discover hidden defects, nor a subsequent purchaser (ie, drilling),
4) consumer protection, able to rely on the fact that house will be fit for its
intended use, 5) by extension of duty to a subsequent purchaser, the builder
will not be taken unaware within a reasonable time when he already owes a
duty, 6) if bar to recovery to subsequent purchaser, then likely there will be
sham first sales to limit liability, 7) Subsequent purchaser is not the best
placed to bear the risk of the emergence of latent defects.
Note: This illustrates the unreality of the assumption that the purchaser is
better placed to detect and bear the risk of hidden defects.
Fraser-Reid v. Droumtsekas: Houses under construction have Implied
Warranties: There is no way to perform an effective examination of house
under construction. The CL provides relief for defective house by implying
warranty that houses under construction will be fit for habitation.
Criticism of Caveat Emptor: the doctrine of caveat emptor stems from the
laissez-faire attitudes of the eighteenth and nineteenth centuries and the
notion that P must fend for themselves in seeking protection by express
warranty or by independent examination of the premises. The assumption
underlying the doctrine is that P is better placed than V or builder to inspect
the building and to bear the risk that latent defects will emerge necessitating
repair costs. However, this is an assumption, which is simply not responsive
to the realities of the modem housing market.

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Tonys Broadloom & Floor Covering Ltd. v. NMC Canada Inc.: If there
is an Indication of a Patent Defect, P has a Duty to Investigate: To
make a determination as to whether something is a defect in the quality of
land, the intended use of the land must be taken into account. They got what
they bargained for and industrial property. If it was a defect, then it was a
patent one in the circumstances. Note: Use this case to say there is an
indication of patent defect if there is some indication of a problem, you are
under a duty to investigate. However, this might be more stringently applied
to a professional developer. Also, argument that this is not a defect when
the property can still be used the way it has been used. This, again, may be
special to industrial type properties.
Contract Provisions
When you are dealing with a real estate question the first place you look at
what the agreement of purchase and sale said. Usually ct will honour those
rules.
Patent and Latent defects: Ct says, if you could see it, you are stuck with
it; if you couldnt see it, maybe you will be stuck with it, maybe you wont.
Clause is meant to say you did inspect it, and you are stuck with all patent
defects. But if you dont inspect it you are still stuck with the patent defects.
By giving the purchaser the right to inspect you are shifting more things out
of the latent box into the patent box.
Fraser-Reid v. Droumtsekas: Intention may be read into a
Contractual Clause and can Override Technical Language: Court
interpret the following clause: providing that the Vendor has disclosed to the
Purchaser all outstanding infractions and orders requiring work to be done on
the premises issued by any Municipal or Provincial or Federal Authority in
respect to the premises referred to herein: The words providing that
ordinarily signify or denote a limitation upon something preceding, or a
condition on the performance or non-performance of which the validity of the
instrument may depend. That is not invariably so. It may also affirm that a
proposition of fact is true and take effect as a warranty. The mere use of a
technical word should not obscure its true nature. A warranty is a term
in a k which does not go to the root of the agreement b/w the parties but
simply expresses some lesser obligation, the failure to perform which can
give rise to an action for damages, but never to the right to rescind or
repudiate the contract. An affirmation at the time of sale is a warranty
provided it appears on the evidence to have been so intended. No special
form of words is necessary
Implied Warranties
In certain circumstances you get some guarantees about the property. They
are implied into your contract. These warranties only apply to a home that is
not complete. These contractual warranties are: Fit for habitation, Good
workmanship, Good materials, etc.
Fraser-Reid v. Droumtsekas: Houses under construction have Implied
Warranties: See above.

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Justice Dickson: A breach was created in the doctrine that the buyer must
beware, with recognition by an English court of an implied warranty of fitness
for habitation in the sale of an uncompleted house. There is no implied
warranty of fitness for human habitation upon the purchase of a house
already completed at the time of sale. A purchaser must fend for himself,
seeking protection by express warranty or by independent examination of the
premises.
Jaremko v. Shipp Corp: Quiet Enjoyment: The vendor breached the
covenant of quiet enjoyment, which is implied when you give a deed.
However, quite enjoyment in law means no one else has the right to live in
the unit. Remember there are different rules about condos and disclosure.
Prof thinks this was wrongly decided: Possible Developer argument: it
was a patent defect because she knows it was the driveway. Caveat Emptor
they disclosed it was the moving room. No evidence of fraud or
misrepresentation, no error in substantialias. And, P was a real estate agent
with specialized knowledge.
Statutory warranties
Applies to new homes: Ontario New Home Warranty Program. Makes
developer fix the properties or prevents the builders from building in Ontario.
Doesnt matter if it is latent or patent defect, if it falls under the warranty it
gets fixed. P of a new home has to assure that the builder is registered with
ONHWP and pay a fee. At closing, P will complete the certificate of
completion and possession (CCP) provided by the builder/vendor and receives
a warranty certificate at that time. ONHWP acts as an impartial referee,
objectively hearing both sides before advising the parties or making a formal
ruling, usually after making an on-site inspection.
Grudzinski v. Ontario New Home Warranty Program: Claim under the
Ontario New Home Warranty Program: I disagree with the Programs
position that the homeowner to rely on this aspect of the definition, must
show the home i.e the entire home, is virtually uninhabitable, uncomfortable
beyond reason, unsafe or in a state of imminent collapse. The functional
deprivation of the use of one third of a residence, whether the 1/3 area was
intended for use as storage, as recreation room, as studio or office, is of such
magnitude that it can only be described as material and adverse. Material
means significant, of much consequence, important, pertinent, germane or
essential. What is significant is that they were precluded from using and
enjoying their basement, 1/3 of their home, for any reasonable purpose.
Fraud
Abel v. McDonald: Deceit and fraud can create a Liability that
Circumvents Caveat Emptor: Basement floor sank, V concealed. Deceit
and fraud can create a liability that you may not have normally had. In this
case they had to pay P after closing the cost of repair. Even if it was a small
problem, V would have had to pay. But if they hadnt been deceitful they
would have had no liability.

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Misrepresentations
Can be both a promise and a misrepresentation. Different remedies
depending if it is a tort or contract claim. Courts use this as a way of getting
around Caveat Emptor. When dealing with a fact situation, you have to
ask yourself if there is a misrepresentation before you look at
whether it is latent or patent.
Thiel vs. Milmine: Negligent Misrepresentation Circumvent Caveat
Emptor: At the very least, the defendant made a representation to the
plaintiffs that the basement was a dry basement with reckless disregard as to
whether it was true or false. Liability was found.
Heightington: A party must be proven to have knowledge in order to
make a Misrepresentation: The land was subject to radioactive
contamination, but the action against Ontario Housing Corporation, the
vendor, was dismissed at trial because apparently it did not know of the
contamination and the trial judge found "[n]o representation was made here,
and on the evidence, it cannot, in my opinion, be shown that Ontario Housing
Corporation was 'guilty of concealment' when the land was leased or sold."
The province was found negligent for not upholding the Public Health Act and
liable for damages to the property caused by that negligence.
Patay v. Hutchings: Where Agent does not perform Due Diligence
their failure to inform client can amount to Misrepresentation: Farm
across the street is a secondary site for the garbage dump. Found that the
purchasers agent did not know about the potential site, but she had a basic
responsibility to make reasonable enquiries because she knew about the P
poor health. Agent was liable.
Note: Is this a latent defect or a misrepresentation case? You can use this
case to argue does the defect have to exist today, or can it be a potential
defect?
Goldstein vs. Davidson: Must disclose potential Heritage
Designations: Found both the vendor and the agent liable in damages to
the plaintiffs for the negligent misrepresentation of the agent in failing to
disclose a potential heritage designation.
Silence Amounting to a Misrepresentation
Sevidal vs. Chopra: Vendor has a duty to disclose the neighbourhood
Danger: The court also says they liable for fraudulently concealing the
contaminated soil they found out about days before closing. So, if you
discover a latent defect that you didnt know about, you must disclose it to
the purchaser even if you discover it after you sign the agreement.
Note: Theory of duty to disclose the latent defect can be used to protect the
Savidals where equitable conversion fails. Vendors have a duty to disclose
the radioactive soil because it is dangerous etc., except they had no
knowledge of it when the deal was signed. However, they had a duty to
disclose neighborhood defects that go to health and safety. However, the

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vendor argued that the govt told them not to worry about it, but the court
doesnt buy that argument
Active Concealments
Vendor converts a patent into a latent defect so the purchaser cant find it. If
there is a defect being concealed it doesnt matter if it is patent or latent b/c
it is Fraud and the courts hate this kind of thing.
Jung v. Ip: V who actively conceals a Latent Defect is Liable: The
vendor had knowledge of the defect, and this was a latent defect (termites).
Court looked at Laskin, and held that a vendor who is aware of the defect
must disclose a latent defect. The fact that they were ignorant of the
law (as they had been duped) did not excuse them of their
responsibility. Caveat Emptor does not apply when there is fraud. Court
said that silence amounted to concealment (prof disagrees, think it should be
misrepresentation). The cost consequences of fraud are much different.
Agents were also found liable because they should have known this was a
termite neighbourhood and they should have put clauses for termite
investigation.
Abel v. McDonald: V who actively conceals a Latent Defect is Liable:
Deceit and fraud can create a liability that you may not have normally had. In
this case they had to pay P after closing the cost of repair. Even if it was a
small problem, V would have had to pay. But if they hadnt been deceitful
they would have had no liability.
Latent Defect in Property
Not all latent defects are the vendors responsibility ones that affect, health,
safety, use are the vendors responsibility. Ones that affect only the value are
the purchasers responsibility.
Ceolaro v. York Humber: P must prove Latent Defects go to
Habitability, Health, etc: Court agreed there was dangerous methane next
door, and it was not something in theory that the pur could have discovered,
and it was not disclosed. Court, however, held that there was no danger bc
there had been no evidence of any methane leakage, and they had complied
with all the govt regulations and the govt felt that it was safe.
Note: In a condo, there are different statutory obligations to disclose, so it is
unclear how this would apply to a different type of residential property. Does
this set up a fourth head under the duty to disclose latent defects material
to a purchaser making their buying decision? Prof does not think this is fair to
broaden this to non-condo circumstances. This case is also used as an
authority to say that is the danger is so remote, and they have done
everything possible to alleviate the danger and the govt has said it
is not a danger, this can guide the court.
***Distinguished from Sividal due to concealment and seriousness of health
risk.
Swayze vs. Robertson: Unfit for Habitation: A latent defect that
requires disclosure by the vendor must be one that renders the premises

43

uninhabitable. The term "premises unfit for habitation" does not mean that
the defect must be such that the entire residence must be rendered
uninhabitable. Application of the principle can and must mean something
more qualified. Any decisions regarding habitability of the premises
must be made on a common sense and reasoned approach based on
the facts of each case. The correct approach must be to consider it in the
context of whether the latent defect has caused any loss of use, occupation
and enjoyment of any meaningful or material portion of the premises or
residence that results in the loss of enjoyment of the premises or residence
as a whole. That, I find has been established in the case at bar. The latent
defect should have been disclosed (Basement was prone to flooding).
Tonys Broadloom & Floor Covering Ltd. v. NMC Canada Inc.: To make
a determination of whether something is a defect in the quality of
land, the intended use of the land must be taken into account ***See
p. 25.
Latent Defects in Neighbourhood
Sevidal vs. Chopra: Where the vendors acquire knowledge of
potentially dangerous latent defect in property at any time before
closing, they are required to disclose the defect to the purchasers
***See Above.
Godin v. Jenovac: P must Prove Latent Defects in Neighbourhood
Affect Health etc: The proximity of landfill sites was held to be immaterial
b/c they were considered not to pose a health standard
Marathon Realty v. Ginsberg: P has Duty to Become Knowledgeable
and Consult Public Record: Property had been down-zoned and the pur
bought it to develop it into a subdivision. The vendor had no duty to draw
attention to the published zoning change, which is deemed public knowledge.
Vendor made no representations. Good case for Caveat Emptor you have
a duty to become knowledgeable as a purchaser, and protect yourself by
contract.
Title Defects
Principles of the Title System:
Curtin: No one has to look behind the title bc it is guaranteed by the govt
Mirror: the title on the search mirrors the real title
Insurance: If there was an error on the title document provided by the
government, the government would have insurance in place to resolve the
issue
***Subject to Easements, government claims (taxes), breaches of the
planning act, fraud, notice
Converting Ontario to Land Titles: Get a lawyer to do a search, tell the
govt it is good, submit this to the govt, send a notice to adjoining
landowners. Govt mandated that every new sub-division/condo was

44

registered in land titles, and the govt moved everything else into land titles
itself. When you have absolute title, your neighbours have no claim, where
as in LT qualified (the govt registered the title without consent), your
neighbours may have a claim. If an adverse possession existed before the
property moved into LT it would be protected.
Guaranteeing Title: Solicitors opinion system. Lawyer reviews title and
tells pur they will have good and marketable title. If there is a fraud on the
title, the solicitor is not responsible. The standard is one of a prudent
solicitor.
Title insurance: Instead of lawyer giving opinion that the title is good, the
title insurance guarantees the title is good. Clients do not have to prove that
someone made a mistake if the risk is covered you get paid. Purchasers
lawyer now gives their opinion to the title insurance company, and the title
insurers will not sue lawyers unless there is fraud unless gross negligence.
Title Clause
Section 10 (p. 351): Provided that title to the property is good and free
from all registered restrictions and, charged, lien and encumbrances. Tests:
Title has to be marketable, If the court would force title on P then it is
marketable.
1) P can take less than marketable title and sue for an abatement
2) V cant force title that is less than good on a P
3) If you can compensate with damages you cant get SP
4) If defect it trivial or immaterial the title will be marketable
5) If title has to be litigated to prove it, it isnt good and marketable.
Remedies: Title Clause is considered a Big Promise (Promissory
Condition) an event that has to occur before parties promises are
enforceable against them. Language read: provided that. Title clause uses
this language, so it appears to be a condition precedent, which would mean
that the purchaser would be allowed to walk from the deal, or elect to
proceed. However, this is actually considered a big promise, so the vendor
may be responsible for damages P can accept crappy title and sue for
damages, or they can walk.

Qualifications of Title
Covenants: negative covenants are also called restrictive covenants these
restrict the use you can make of the property. Neg covs run with the land.
Positive covs are where you promise to pay money (i.e. shared road). These
do not run with the land they are personal. You have to close the deal
with a restrictive covs even if you didnt know about it. You can
amend the agreement and take the clause out saying you will accept
registered restrictions, or you can title search before you sign the agreement.
Municipal Encumbrances: i.e. developer agrees to put in sewers. Positive
covenants by the municipal govt do run with the land, or provide a
charge if it has to go do the work the pur agreed to. These are

45

encumbrances on the land you would be bound by. Lawyers write to the
municipality to ensure that the developer obligations have been met.
You must accept these minor easements to the property that
supplies services to the property or adjoining property; anything else
you put in the agreement that qualifies title.
Quality of Title: Good and free of all encumbrances except for(a few back
downs) is the quality of the title the purchaser is guaranteed to get in the
agreement of P&S.
Good Title Test: Arose out of the remedy system of specific performance.
What kind of title would the court force the pur to accept = good
title (bad definition, but thats what it is). You can force a
possessory title on a pur, but you cannot force title the pur would
have to litigate to prove. Where there is clearly no title, it would be bad
faith to elect to accept the repudiation. In Le Messurier, they were forced to
take it with an abaitment. Where there is an issue whether the title is good,
the courts may say that is the kind of title we can force on the pur. Are they
entitle to damages?
Note: For you to find that there was a patent defect you have to find that
there was title subject to a wart. Court can say that the parties agreed to take
it, not creating a legal concept outside of the agreement, the contract itself
says to take that issue. If we force them to take this defect, is P getting what
he bargained for. If P bargained for title with a wart, then you can force P to
take it.
Back Downs from good title
1. Registered restrictions and covenants that run with the lands provided
complied with
2. Registered municipal agreements if complied or security
3. Minor easements supply of services to property or adjoining
4. Easements for serviced which do not materially affect present use
5. Save as set out in agreement
Marketable Title
Clement vs. Wyatt : Test for Marketable Title: A vendor must show a
good title. This means a merchantable or, a marketable title: one which at all
times and under all circumstances can be forced upon an unwilling purchaser
who is not compelled to take a title which would expose him to litigation or
hazard. One which is free from litigation, palpable defects and grave doubts
and couples a certainty of peaceful possession with a certainty that no flaw
will appear to disturb its market value. (Planning Act case: Found the lawyer
was responsible; recovered damages against the lawyer)
Note: Clements concerns the definition of "marketable titles". Where the
purchaser is a builder buying for immediate resale, the title, to be
marketable, must be not only be one that the purchaser's lawyers believe to
be satisfactory, but also one that can be forced upon an unwilling purchaser
without any reasonable questions being asked about the title. This view casts
substantial doubt upon titles that rest upon technical evasions of The
Planning Act. Any purchaser of real estate, even if he does not intend to

46

purchase the land for investment of speculative purposes, should be able to

treat his title like any other marketable security and be able to sell it at his
own volition w/out the handicap of a purchaser calling into question the
validity of his title.
Green v. Kaufman: P must act in Good Faith when Repudiating due to
a Title Defect: Reason for the repudiation was a construction lien that could
be removed pursuant to a statutory right of payment into court, which would
clear the title. P refused personal undertaking of the Vs solicitor to have the
lien removed, or a one-day extension of the time for closing. Courts should
be reluctant to allow parties to escape honestly made contracts in situations
such as this where very small amounts of money are involved, since the final
result is that P gets everything he contracted for rather than something less
with an abatement in the purchase price. In view of these offers, P was then
not acting reasonably or in good faith in repudiating the agreement.
Court said he had to close but could hold back the money required to hold the
title.
Carter: Good result on these facts, but this is a tough principle to control. How
valuable does the lien have to be before the purchaser can justifiable rescind
the k?
LeMeusier v. Andrus: If the Title Defect is immaterial, P has no right
to R (de minumus Principle): its both a good faith case and a defect in
title case regarding the latter, this defect was minor and immaterial and
didnt affect use of property. Therefore purchaser was not free to rescind.
Toll vs. Marjanovic: Reinforces de minimus Principle: A purchaser will
be found to have a valid objection to title where a defect will affect the
purchaser's use or enjoyment of the property in a significant way. The
vendor's inability to give good title to 1.6 per cent of the property was not
sufficient to permit the purchasers to repudiate the agreement. His
renovation plans are vague and nonspecific. There is no evidence of this
being mentioned at the time, and it is unclear how the small strip of property
at the south end would affect the coverage or the renovations. The case law
imports a de minimus principle to this determination. The Court of Appeal in
LeMesurier v. Andrus found a deviation of .16% to be inconsequent
Title Defects
Title Search Regime: Purchaser has a period of time to examine title to
property and complain about it (if lawyer doesnt like it): Then V and P decide
if its something they can clean up or not. If cant clean it up, purchaser can
refuse to close since they arent getting what they bargained for. This clause
sets up time frame if purchaser dont complain about title w/in time frame
(the requisition date), purchaser is deemed to have accepted it.
Carter: Ask: Is this an issue that goes to title, or to encumbrances that affect
title? Different analysis depending on which.
Yandle vs. Sutton: Patent Title Defect and Open Contracts: This isnt
our system our system relies on contractual provisions dealing w/ title, we

47

dont have open contracts. The concept of patent title defect applies to case
w/ no title clause so this case in here dealing w/ this old technical concept,
could apply in open K case, but this is not how RE is bought and sold now.
Carter: The problem is you have these open K cases out there that the
litigation lawyers will turn to and use as another tool to help client recover,
and courts read them and they are unclear as to what the law is struggle as
to whether this is appropriate or not. SO VENDOR IN YOUR FACT SITUATION
CAN ARGUE PATENT DEFECT BASED ON YANDLE but recall given Yandle
even in an open K it would be hard to come up w/ a set of facts where patent
defect in title would apply implies you have to have understood significance
of what you saw (well-worn path = public right-of-way)
11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd.: A
Lease which is requisitioned and cannot be discharged Constitutes a
Title Defect: This was title requisition and since vendor could not
discharge, title was defective; purchaser received specific performance with
abatement. The vendor was reckless and thus could not rely on the rescission
clause - If you knew or should have known that your title was encumbered, it
is your duty to deal with that as part of your contract; V was reckless in giving
a promise that you could not fulfill.
2 categories of requisitions: 1) Title (mortgage, tax, lease) 2) Contract
and conveyancing (fixtures, chattels, towers, eviction of tenants)
Conveyance is an encumbrance which the vendor can deal with by virtue of
his own interest or power over the property or by the occurrence of a party
which the vendor can compel. The policy of the court ought to be in favour of
enforcement of honest bargains. To rely on clause, vendor must act
reasonably and in good faith. If lease occurred before vendor purchased
property, possible to forget and get out of contract.
Steiglitz vs.Prestolite: Test for Good Title: Laskin: The appropriate test
was not whether the defect was patent or latent (Yandle & Sons v. Sutton),
but whether the purchaser was faced w/ acceptance of property which would
be materially different from that for which he bargainedIf the undisclosed
easement materially affects the land in question, then the objection to the
easement is a valid one. The same criterion would apply to encroachments.
Land is essentially open to contingent future claims. The purchasers,
therefore, can rescind the agreement where the issue is not minor. Facts:
There is a parcel of land where 6 of the property had been sold to city for the
subway. The city had also gotten an easement over some of the land to
maintain a retaining wall. At the time the city did these conveyances, the
building on the land was on the 6 and the easement. For whatever reason,
the vendor was not aware of the situation. The purchaser thought they were
buying all of the land without a major easement (not a permitted
encumbrance). Purchaser did their search and said you dont won part of the
property, so the purchaser requisitioned it. The vendor had another survey
done, and said yes your were right. The vendor went to the city, and the city
would have given and encroachment agreement saying you dont have to
take your building off our land, but they may in the future. P won.

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Tonys Broadloom & Floor Covering Ltd. v. NMC Canada Inc: Patent
Defect Creates Wart on Title: For you to find that there was a patent
defect you have to find that there was title subject to a wart. Court can say
that the parties agreed to take it, not creating a legal concept outside of the
agreement, the contract itself says to take that issue. If we force them to take
this defect, is P getting what he bargained for. If P bargained for title with a
wart, then you can force P to take it. ***See p. 25.

Other Title Defects

Goldstein vs. Davidson: Potential Heritage Designations Create a
Wart on Title: ***See Above
Kolan v. Solicitor: A Demolition Order Constitutes a Defect on Title:
Lawyer for P should have located prior to closing. The obligation of V was to
give a marketable title in fee simple, free and clear of encumbrances.
Breaches of zoning by-laws or failure to conform to a work order can be
considered defects of title which will entitled P to rescission, even
though they relate to the actual physical condition of the land. To
affect marketability of the title they must be expressly mentioned in
the contract of sale as grounds for avoidance.
Tabatta vs. Williams: Occupancy Certificate Required for Good and
Marketable Title in New Construction: A solicitor was held liable for
not assuring himself that an occupancy certificate had been issued with
respect to new construction. The lack of the occupancy certificate indicated
lack of a final inspection that might have revealed a construction defect.
Stefanovska vs. Kok: Municipal Easements on Title do not entitle P
to Rescind: Judge found that the easement herein was related "to the supply
of domestic utility services to the property" (an exception in the agreement of
purchase and sale) but went on to say: "Again, the true and overriding test to
be applied in these cases is whether the impediment to title, in any
significant way, affects the use and enjoyment of the property. As earlier
indicated, I have found this not to be the case." (P argued easement
interfered with planned garden) V succeeded.
Ceolaro v. York Humber Ltd.: If V has taken reasonable steps to
remedy a Title Defect, Title may be restored to Good and Marketable
Condition: What if the defect has been remedied? Definite gray area. You
shouldnt really have to disclose it if its been corrected, but underlying
concern is have you really corrected it? i.e. car that has been in an accident?
This affects value. But strong argument that there is no real defect
here.***See Above.
Rescission Clause
Rescission Clause (Vendor driven remedy system)

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APS enshrines rule of Bain v. Fothergill not open for purchaser to sue for
sp w/ an abatement
where there is 1) a valid objection to title which is 2) made in writing, 3)
which vendor is unable or unwilling to remove remedy or satisfy or obtain
insurance and, 4) purchaser will not waive it, then, 5) the agreement is at an
end. So, there is a system to allow vendors who are bona fida, once
they discover their title is bad, can call off the deal. Courts dont like
this provision they want purchaser to be able to take property and sue for
abatement. So they have put limits on the exercise of this clause.
11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd:
Reckless V is not entitled to Rescission: AP&S provides for a title free of
encumbrances, vacant possession on closing, and ownership of all fixtures. It
makes no reference to the Cantel tower, shed, lease, or easement. V
terminated the agreement, taking the position that P objected to its title and
that it could not satisfy the objection. P tendered, but V refused to close. If
you knew or should have known that your title was encumbered, it is your
duty to deal with that as part of your contract (were you reckless in giving a
promise that you could not fulfill?)
Requisitions
Requisitions: The law makes a distinction as to three kinds of requisitions:
(1) Ordinary objections to title.
(2) Paragraph 10 makes reference to objection going to the root of
the title. An example of this is where the vendor has no title to give, that
being the foundation of the agreement. It is unlikely that courts will rule that
a requisition goes to the root of title except in the most extreme situations
(3) Requisition of conveyance: The theory is that, while an encumbrance
(or flaw) may affect title, to the extent that it is wholly w/in the power of the
vendor to remove, it becomes a mere matter of conveyance and not a true
requisition on title. Examples are: obtaining the discharge of an open
mortgage, obtaining an affidavit of execution on a mortgage discharge, lifting
a writ of execution against the vendor, obtaining an estate tax release,
producing a mortgage statement where the vendor has undertaken to
produce it, obtaining estate or succession duty releases, obtaining a survey,
and obtaining a discharge of a construction lien.
***The primary importance as to what kind of requisition is made is w/
respect to timing. Requisitions as to title must be made by the
requisition date, whereas the other two kinds may be made up to
closing.
Majak Propertyies Ltd. v. Bloomberg: Objections to Title must be
Requisitioned by the Requisition Date: If P fails to submit requisitions
respecting objections to title w/in the required time which will result in the
purchaser being deemed to have accepted the vendors title. Matters of
conveyance may be said to be those by which V alone or with others persons
whose concurrence he can require is in a position to convey the title to the
property. If V is not entitled as of right to obtain a discharge of an
encumbrance then it is an objection to title. The result in this case is that

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none of the objections went to the root of title. They were thus merely
objections to title. By failing to make them within the allotted period,
purchaser is deemed to have accepted the title, as far as they were
concerned, as it stood.
Toth v. Ho: Objections to Title must be Requisitioned by the
Requisition Date: Matters of conveyance are those by which the vendor
alone or with the other persons whose concurrence he can require is in a
position to convey the title to the property.
Where there is a closed mortgage, then the discharge of the closed mortgage
would be a matter of title (not conveyance). Thus, where there is a closed
mortgage, the discharge of the closed mortgage must be requested before
the requisition date. Had they requisitioned in time, crt could have said you
have to close this deal and find a way to prepay mrtg, but bc the problem
going to the root of title was not requisitioned in time, V could not enforce SP
(which would have meant conveying title to P free of all encumbrances).
Objections going to the Root of Title: Are there any objections to title
which are so serious that the purchaser can still make them even though they
were not submitted w/in the prescribed time for making objections? The
answer is that objections which to the root of title can still be raised by the
purchaser. If there is a total failure of consideration and the purchaser would
receive nothing at all, not even the possession of the property, an objection
to title on such grounds would go to the root of titleApart from the situation
where the vendor has no power to sell, it is difficult to define accurately what
objections go to the root of title. If the vendor does not have the power to
give the purchaser what it is intended y the K he shall have, then the
objection may go to the root of title.
Replying to Requisitions and Methods of Satisfying or Dealing with
Them: Courts will not require V to search his own title and resolve any
problems that might be discovered. Requisition that is only meant to
preserve rights and not a serious concern that might trigger the rescission
clause and lose the deal for the client.
The Land Titles Act: Where a serious technical defect is involved but there
is little practical risk of the assertion of an adverse claim, it may be possible
to apply to have the property registered under the Land Titles Act.
Time Provisions and Tender
Time of the Essence
A triggering device, not a promise, representation, or a condition. In real
estate, courts of equity has pretty much said that time is of the essence. The
reason for that is that in RE the market goes up and down, such that closing
on a certain date could be fundamental to what you are buying. But it doesnt
have to be that way if facts and circumstances lead the court of equity to say
that in these circumstances parties could not have meant time to be of the
essence.
It is an on/off system if it is on and there is a breach of a big promise, the
injured party can accept repudiation or enforce specific performance. If they
accept repudiation, they are relieved of their duties. If TotE is off, the

51

contract is not terminated. This is a big promise remedy system. The

issue is when is it on and when is it off. Most contracts use the language to
turn it off, lacking that language, the courts determine if it is on or off. If one
party is ready to close on the closing date (innocent party), time of the
essence is on. If both parties are not ready, then TotE is turned off, but the
contract is still on, and either party can turn it back on by giving reasonable
notice of a new closing date.
Provisions in the Contract
Since most Ks dont specify for which provisions time is essential, court will
determine whether all or some. Today there is no definitive answer to
this question. But we know: Closing date is essential. For requisition date,
condition dates, and delivery of deposit. Carter suspects these others are not
essential, but inconclusive. An interesting question is: when the innocent
party elects to keep the K alive, is time of the essence? For our
purposes, we are going to take the position that when there is a unilateral
default and the innocent elects to keep the K alive time is no longer of the
essence. When both parties default, clear that time is not of the essence.
Available Remedies upon default where Time was of the Essence:
1. A person who seeks specific performance must himself have been
ready, willing, and able to complete at the time fixed for performance
2. Where time is of the essence and the purchaser defaults, vendor who
has been ready, willing, and able to complete may but is not obliged
to invoke contractual remedy
3. A party who defaulted on the date fixed for completion cannot
resist an action for specific performance on the footing that
the other party was also in essential default
4. Where parties have expressly stated that time is of the essence, equity
respects this
5. If contract by its terms imposes a duty on one party to extend the time
in certain events, then he must observe that term
6. If the contract contains condition, party cannot resist specific
performance any more than he could resist action on grounds of nonfulfillment of condition if he has prevented its performance
Luther v. Wood they must be considered to have taken into account the
risk of all such obstructions to their works as they allege
If both parties are in default time is no longer of the essence : So you
have a continuing K theory is that either party can say to the other party
that they are now ready to fulfill their promise, and clock starts to run again
court allows either party to unilaterally make time of the essence,
but have to give reasonable period of time in the circumstances
for other side to fulfill their promise. So if upon closing the other side is
still in default you have an election.
Note that the other side can flip this on you if you turn time back on and
then you arent ready to close but they are, you are in default. If both arent
ready, time if turned back off
Extensions

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When you want to extend closing date:

1) Do it in writing
2) Say time is of the essence
3) Say all other terms unamended
4) Look at adjustments the credits/debits to the purchase price resulting
from pre-paid expenses, i.e. pay interest on the money arising form the
extension, or Ive sold my house I have nowhere to live let me live in
house for two weeks before closing
5) Who should write the extension letter (lawyers or clients)? As a general
rule as long as you tell the other side as lawyer that you have authority of
your client to extend the deal then its reasonable to rely on this
representation
How to Approach a TotE Question:
1. Determine if the was a Promissory Condition
2. Determine if time is of the essence (assuming you want to
terminate the APS otherwise you can just ignore this breach and keep
the k alive)
a. Innocent party can treat K as at an end and sue for damage
b. If condition was a common intention contract is not at an end
Salama Enterprises (1988) Inc. v. Grewal: Equity has the Power to
qualify right of Innocent Party to call Contract at an end: The court is
saying they are going to imply a promise by the vendor to make it possible
for purchaser to deliver the promise the deal is that purchaser promises to
get road such that vendor can fulfill the promise, court turns this around and
said that V had promised to make it possible for purchaser to deliver its
promise so by repudiating the agreement the vendor has breached his
promise and as a result the vendor is in default.
R (Dissenting): Equity shouldnt rewrite Ks. Is every vendor faced w/ a
defaulting purchaser, in order to avoid the devastating implications of a
lawsuit to his bank balance, to abandon his legal right b/c the courts may
import into a simple piece of paper a concept which cannot be found in its
four corners? In my opinion, the decision of this Court when analyzed is, in
reality, a revival of the dictum of Lord Thurlow long exploded that time
cannot be made of the essence of the K in equity.
Carter: Two ways to look at this situation:
1.
Purchaser is in default, its a condition, if time is of the
essence vendor has right to accept the default but court feels bad
for purchaser so it turns off time provision. Some mechanisms available to
do so:
- When vendor extended the deal you didnt make time of the essence
and therefore you vendor cant rely on it
- Vendor has waived time of the essence by giving a series of extensions
- Vendor is estopped from relying on time of the essence you led
purchaser to believe that you would keep extending the deadline.
Seems pretty clear that Carter would approve this approach
consistent w/ established principles though also kind of penalizing
vendor for being nice

53

2. Flip the promises around, say there is a common intention like the
court did here fool around w/ the K in order to get the result you want
Landbank Minerals Ltd v. Mesgeo Enterprises generally, time
extension is substitution and does not affect time being of the essence.
King vs. Urban County: Appropriate Notice must be given to turn
TofE Back On (Letter): Neither party was ready to close on the closing
date. It has been uniformly held in this province that that does not put an end
to the k. A time is of the essence provision, and non-compliance w/ it by a
P, can be set up as a defence only by a party who was himself ready, willing,
and able to close on the agreed dateNormally, in this situation, 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 w/ respect to the new date. they did not do this, but court
found that since is was obvious you wanted to close (to V). And, it wasnt
that V couldnt close, it was that he didnt want to.
*** Also est. principal that if the deal closes on a weekend, it closes on the
Monday after.
Kwan v Cooper: A Party who Insists on Strict Performance of the
Contract and then defaults if barred from turning TotE back on:
Similar facts to King v Irvine County neither party was ready to close.
Vendor sued purchase. Makes distinction day before closing vendor sent a
letter saying they would stand on the strict terms of the contract and require
closing on the date. However, on their date they couldnt close either. Held
vendor precluded himself from relying on King when he tried to
enforce the strict contract when he could not close on the date he
terminated the contract letter precluded them from the on/off system.
Carter: This makes no sense with King. If you say right before closing that
you are ready and then you are not, then you deprive yourself of king. Prof
thinks this case is just wrong.
Ridiculous b/c every vendor wants the deal to close every time there is a
double default one party thinks they have not defaulted
Kwon v. Cooper says deal is over thats the difference opposite rules
good news is a litigator can argue Kwon v. Cooper
Domicile v McTavish: Upheld King and Added: If a Mutually
Defaulting Party makes in impossible to close the deal, they cannot
turn TotE back on: Both parties were unable to close on closing date.
Looks at King v Urban County and elaborates, a party who is not ready to
close, and who subsequently terminates the deal and makes it impossible to
ever close has repudiated the deal. Both parties were in default K
continues time not of essence Domicile goes and sells to someone else
so court found that Domicile was fundamentally in default and liable in
damages:a party who is not ready to close on the agreed date and
who subsequently terminates the transaction w/out having set a new
closing date and w/out having reinstated time of the essence will
itself breach or repudiate the agreement.

54

Carter: Thinks this is unfair bc McTavish is the one who could not close. The
only rational argument is that Domiciles breach was so catastrophic to the
deal selling the property to someone else that that is the breach that in
effect ends MacTavishs obligation its like an anticipatory breach. Lawyers
were hoping they would say Kwan v Copper was decided incorrectly, but
instead Laskin sort of ignores it.

Remedies
Anticipatory Breach: Has to be absolutely clear that purchaser has no
intention of completing the K. Unclear whether innocent party is expected to
mitigate damages at time of anticipatory breach or when the deal fails to
close.
Purchasers Remedies (where the vendor defaults and the purchaser
is not in default):
Specific performance w/out an abatement: If the vendor says Im not
closing, there is nothing wrong but I just dont want to close, then purchaser
can sue for specific performance.
Specific performance w/ an abatement: Purchaser can take what vendor
has and sues for whatever the deficiency is, where applicable. If the
purchaser sues for specific performance, any time before trial specific
performance can be converted into a damage action. In addition, you can sue
for specific performance and alternatively ask for damages in your claim.
How can P make sure property is still available to on closing?` Have
to somehow put notice on title that you are claiming interest in property:
Register APS APS is a conveyance of equitable title to the purchaser
registry offices will allow you to register notice of the agreement to recognize
your equitable interest in the property can do this at any time before
closing. Can do it after closing has not occurred. Register a certificate of
pending litigation brings into question ownership of property. Note that
in neither of these two situations is the vendor precluded from
selling to a third party, just that if you are ultimately successful the third
party will be bound by court order or you will have prior interest in the
property.
***If the vendor already has a mortgage on title and then you register your
certificate this does not bind the mortgagee he still stands in priority.
Complete Transaction & Seek Damages: where (i) breach of a condition
(gives P election); (ii) breach of a warranty (only option); (iii) negligent or
fraudulent (not innocent) misrepresentation or (P has elections to rescind or
close and sue)(iv) negligence of vendor as equitable trutee. This is your
safest option where applicable. Innocent representation the only option is to
rescind.
Carter: A lot of Ps refuse to close w/ the defect and instead sue for specific
performance + abatement. This is not smart better off closing and suing for
damages. If you refuse to close and you are wrong then you will be liable for
damages. And if you are right but you are not entitled to specific performance
because damages are adequate then your damages will be limited by the

55

mitigation principle so even if youre right you could end up w/ less

damages.
Rescind K: Purchaser wants to treat K as if its never occurred. Purchaser can
rescind for any misrepresentation provided it is a false statement that is (1)
material, (2) relied on by purchaser, and (3) induced P to enter into the K. If
you find out about any types of misrepresentation before closing you can
rescind. If you do close transaction you can still rescind for a fraudulent
misrepresentation, but not for an innocent or negligent misrepresentation.
Purchaser can also rescind K for various other things: undue influence,
duress, non est factum, breach of fiduciary duty, illegality, unconscionability,
error in substantialibus, failure to satisfy true condition precedent or a
condition precedent, frustration
Repudiate the K: Arises from failure of vendor to fulfill a true condition
precedent.
Sometimes drafted as termination of rights rather than conditions precedent
if I dont get financing by certain date I have right to terminate the K and
get deposit back. Damage and destruction clause if there is substantial
damage to property the purchaser has election take insurance proceeds and
close deal or terminate the K and get out of deal
Constructive trust: Available where agent steals property from would-be
purchaser
Vendor and Purchaser application/Rule 14 Declaration: Not a remedy
but a way of determining what your rights are if you are not sure what your
rights are (title defect or not) these are proceedings you can take to
determine what your rights are ahead of time
Return of Deposit paid: Purchaser can bring action to get deposit paid
back when they accept repudiation by putting a lien on the property for
purchase of the deposit. Treated in law just like a mortgage, can be enforced
just like a mortgage if anyone else comes later and buys the property they
will be behind it in priority, however if subsequent party does not have
knowledge of purchasers lien that party will take property free of it so you
have to register purchasers lien.
Injunctive relief: Enjoin the vendor from doing something have to be
creative as to when that would be appropriate, b/c you have a set of other
remedies.
Rectification: If there is a dispute b/w vendor and purchaser as to what the
deal is, as part of your relief you would bring an application to remedy/rectify
the argument as to what the deal is
Do Nothing: P would lose deposit (and any other payments) and hope the
vendor will forebear suing her because of rising market or of cost of legal
fees.
Sue Third Party: real estate agent, solicitor, appraiser, surveyor, builder,
architect, engineer, inspector, government, etc. for breach of contract,
negligence, negligent misrepresentation etc.
Vendors Remedies (where Purchaser is in default)
SP With/Without Abatement & Damages (in Alternative): V may seek a
claim for SP with or without an abatement and with a claim for ancillary
equitable damages, but this is unlikely because V has to deliver everything

56

that was bargained for and he cant force an abatement on P. But, in Le

Messurier, the court gave an abatement where the discrepancy was minor.
Rescision: (i) duress, undue influence, unconscionability, want of contractual
capacity, mistake, non est factum, illegality or breach of fiduciary duty or
authority; (ii) failure to satisfy a condition precedent or a true condition
precedent (e.g. approval of board. V can accept repudiation and terminate);
(iii) misrepresentation (unusual); (iv) termination right (contractual rescission
clause or damage and destruction clause).
Close and Sue for Damages for Breach of Promise: i.e. failure to close.
Dont Close and Sue for Damages
Enforce Vendors Lien: if the deal closes and part of the purchase price is
not paid e.g Solachi.
Judicial Determination of Contract: rule 14 or Vendor and Purchasers
application or rectification.
Claims Against Third Parties: title insurer, lawyers, agents, building
inspector, government, other professionals (e.g. accountant), etc.
Specific Performance
An equitable, court-ordered remedy arising out of equitable conversion that
requires the precise fulfillment of a legal or contractual obligation when
monetary damages are inappropriate or inadequate. It is subject to equitable
defences (estoppel, lashes, acquiescence, hardship, clean hands, unfairness
& affect on third parties)..
Issues in SP
Uniqueness: Specific performance was historically available b/c real estate
was considered to be unique. And even though vendor is looking for money,
not property, historically the view was that if the purchaser could get sp then
vendor should have it as well. It started out that this was automatic but
since Semelhago this has evolved, test now is: can purchaser be adequately
compensated in damages? To work out this test you look to (1) uniqueness/
(2) reasonable substitute, among other factors
Mitigation: mitigation of damages doctrine requires P to take reasonable
efforts to alleviate effects of the injury or breach or to risk reducing recovery.
Problem is that you cannot mitigate when seeking SP b/c K lives until trial so
the defaulting party could pay more if P elects to take damages. A mitigation
issue arises when the court can say a person did not act reasonably in
mitigating their loss so they dont get to recover all losses. Problem is there
wasnt a sale at the date of reasonable mitigation, so you need to get
appraisal evidence. Ct picks the closing date as the date from which to assess
damages as a punishment for not mitigating within a reasonable time.
Election of Damages: up until the trial, P can switch their claim for SP into a
claim for damages or request damages in the alternative.
Ready, Willing & Able: if you are arguing for SP, you have to be ready,
willing and able to close the deal until trial because the defaulting party could
turn time of the essence back on by giving you notice.
Objection to SP: Suing for SP essentially allows you to speculate on the
market if the property goes down you get the damages you would have
suffered, but if it goes up you get the appreciation. The law is developing

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to counteract this by punishing you for suing for SP if you are not
entitle to it. However, There is a risk you will not get SP, so it is
better to mitigate. Incentive not to go for SP if you lose, you may not get
the same mitigation you would have gotten if you sued for damages. In a
declining market, where the vendor defaults the purchaser should accept
repudiation and find a substitute property. If you force SP, you would get the
house for much less than it is worth at the point of the trial judgment.
Specific Performance (Vendor)
Mutuality: under the old, almost automatic system, SP was routinely
available to V, on the basis of the doctrine of mutuality (i.e. if P is entitled to
it so to should be V)
Substantially Bargained: V, in using SP, must deliver to P substantially
what P bargained for.
Suitable P: if you cannot find a P for your property at any price, then you, as
a V, will be entitled to SP because no suitable alternative. See Dick.
Specific Performance (Purchaser)
If you do get SP now, the date of trial is not date from which damages in lieu
of SP are calculated. It is only calculated from the day of close. You have to be
put back in the same position you would have been in from the day of close.
So if the property goes up $100,000 at the day of trial and $50,000 from the
day of close, you get $50,000. Not only do you have to make the decision at
the time of close whether you want to use SP, you have to keep reassessing
whether you should continue with it because now the court will tell you not to
be continuing with you action.
Equitable Damages in Lieu of Specific Performance: If you are not in
same position you were upon closing the court can award equitable damages
(i.e. if on date of closing mortgage rates were at 5% now they are at 10% on
date of specific performance). Have to look at if its something that would not
have arisen if youd closed on closing date
Current Tests for Specific Performance
Investment Purposes: if P is buying the property for investment purposes,
he may not be entitled to SP even if the property is unique because P is really
just looking for money so damages likely will suffice. But, in a Soulis type
situation, SP is still necessary despite the investment property aspect.
Real and Substantial Justification: court ask P to prove that there is a real
and substantial reason for receiving this exceptional remedy. This can be
done by showing that damages are inadequate (i.e. property is unique).
Damages Inadequate: in order to obtain SP today, a P must demonstrate
that common law damages do not provide an adequate remedy. The
uniqueness of the property is often at the heart of this issue.
Suitable Alternative: to obtain an order for SP demonstrate that there is no
suitable alternative.
***Mitigation date is not a fixed date: its whats reasonable in the
circumstances, so its hard for court to pick a date. Dates court can choose
from are closing date, mitigation date, and date of trial, however date that
court will often calculate damages from is date of closing or reasonable

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period of time after closing (date that party should have reasonably mitigated
its loss)
Bashir v. Koper [1983] OCA: Old Law: Where necessary conditions are
satisfied, court will almost invariably decree SP of a contract regarding land...
Further, as the court will not interfere in favour of one party and not of the
other, V can maintain an action for SP as well as P.
Domowicz vs. Orsa (1993): A Property Purchased for Profit cannot be
Unique: When you breach a contract, there are some damages you dont
have to pay (too remote, could not have anticipated, ect.). Subject to the
inadequacy of money damages, SP may be appropriate, but a suitable
substitute is the standard, not identical. Applied theory of efficient breach
where damages can compensate the injured party, they are preferred,
because then they will engage a third party and increase a market economy.
Criticism of previous judgments RE: SP - It has been assumed in RE that
inadequacy of damage is presumed, however this is not the standard test - Is
there some fair, real, and substantial justification for SP (Justice Adams). The
court also found that the purchasers should have mitigated their losses by
purchasing another apartment when it became apparent that the transaction
would not close in the reasonably foreseeable future
Semelhago: SCC Affirmed Domowicz: Potential for P to make a lot of
money on the vendors default. At trial, the purchaser asks for damages in
lieu of SP. SCC would not have awarded SP, so the damages would have
been in relation to what it was worth on the day of closing (incentive to
mitigate damages post-closing). However, everyone argued the case as if
you would have gotten SP, so that is what the court awarder, but obiter
essentially, made it clear that judges do not automatically give SP in
Real Estate anymore.
904060 Ontario Ltd: Proving Uniqueness: Whoever has the burden of
proof will loose because they did not discharge their burden. In my view the
presumption of uniqueness has not (yet) been replaced by a presumption of
replaceability, and that what the SCC did in Semelhago was to open the door
to a critical inquiry as to the nature and function of the property in relation
the prospective purchaser
Carter: This case arose b/c law was in state of flux, and they didnt want to
punish the purchaser who didnt bring any evidence of uniqueness not clear
that this case would be decided same way today.
11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd.: The
party bringing the application has the Duty to prove uniqueness:
Came down to whether there was a suitable alternative to this property. Test
has always been would CL damages be insufficient bc the uniqueness of the
property. Ordered SP bc they needed this property to complete the
development. The Semelhago test is that absent evidence that the property
is unique to the extent that its substitute would not be readily available,
specific performance should not be granted as a matter of course. Although
not dealt w/ explicitly in Semelhago, it seems to be implicit in the

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judgment that uniqueness is a matter to be proved and not

presumed. If this is so, the proof should lie w/ the party seeking the
remedy
John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd.: Suitable
Alternative must be available at the Time of the Breach: Excellent
analysis of what judges should do in evaluating SP. Magna proposed suitable
alternative, but court held that they were not suitable (thought Vs were
arrogant bullies, may have coloured decision). The appropriate time to
determine if a suitable property is readily available is at the point of
breach, bc that is when the innocent party has to elect to sue for damages
or SP. P is not required to prove a negative and demonstrate the
complete absence of comparable propertiesIt is important to keep in
mind that uniqueness does not mean singularityThe P need not show that
the property is incomparable.
Equitable Damages in Lieu of Specific Performance
Semelhago: A party entitled to SP is entitled to elect Damages in
Lieu: Rationale for assessing the damages at the date of breach in the case
of breach of K for the sale of goods is that if the innocent P is compensated
on the basis of the value of the goods as of the date of breach P can turn
around and purchase identical or equivalent goods. P is placed in the same
financial situation as if K had been kept.
Assessing Damages: You can assess damages at three points: Date of
breach, Mitigation date, Date of trial/judgment.
Wroth and Another v. Tyler: Court assessed damages at the time of
Assessment and not as at the date of Breach of Contract: Husband
entered into a K to sell the house, the wife entered a claim in the charges
register for rights of occupation. She would not remove this claim and the
transaction could not close, the value of the home rose from 6000 to
11500 b/t when the agreement was made and the date of the trial.
Consequently, P were entitled to damages of 5,500 in substitution for a
decree of SP. General rule of assessing damages as at the date of the breach
seems to defeat the general principle, rather than carry it out. It seems that
on the facts of this case there are strong reasons for apply the principle
rather than the rule.
Annsdell v. Crowther: Reasons to Mitigate: Only in exceptional
circumstances will the vendor be able to obtain an assessment of damages
as of the date of the trial. They could have mitigated their damages by
finding another purchaser.
Specific Performance with Abatement
LeMessurier v. Andrus: Vendor is entitled to specific performance
with an abatement if they are in a position to convey substantially
what the contract called for: On an objective test, the defect in title was

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very minor, and was not sufficient to justify the repudiation of the contract by
purchaser. V had amended to action for damages before judgment.
11 Suntract: SP w/ Abatement contemplated on basis of Reasonable
Purchaser: The power to order SP with compensation involved the court in
the difficult task of attempting to discern the intention of the parties from an
agreement which did not contemplate what actually transpired. P is at once
asking the court to enforce the bargain that was made and to re-write the
bargain that was made. Reasonable P would have bought the land either as a
retail development site or for industrial use. P buying land for a retail purpose
would have paid $750,000 with their knowledge of the tower, lease and
easement, so SP with an abatement of the Purchase price to this amount.
Equitable Defenses
Grauer Estate v. Canada: The defense of Laches: A P in equity is bound
to prosecute his claim with out undue delay. This is in pursuance of the
principle which as underlain the Statutes of limitations. A court of equity
refuses its aid to stale demands, where P has slept upon his right and
acquiesced for a great length of time. He is then said to be barred by his
laches. The equitable doctrine of laches refers to the Ps failure to bring her
action in a reasonable amount of time. In this case there is no deterioration in
the Ds position, so the defence of laches fails.
Hong Kong Bank of Canada v. Wheeler Holdings : Clean Hands:
respondents should be denied relief they seek b/c they are guilty of
misconduct. Equity will not apply the principle about clean hands unless the
depravity, the dirt in question on the hand, has an immediate and necessary
relation to the equity sued for. Entire transaction does not become tainted b/c
certain parties to the transaction may have unclean hands.
Stewart v. Ambrosina et al: Hardship: If undue hardship would be
inflicted upon a D in an action for SP, then a Court may exercise its discretion
and refuse a decree of SP. It turns on a provision of s. 6 of the Dower Act and
in light of that, I dont think that it can be taken as an authority for the
proposition that undue hardship alone is a ground upon which the Court can
refuse to grant SP. Event if this wasnt so, hardship must have existed at the
time the contract was made and cannot be hardship that has arisen
subsequently from a change of circumstances. SP was awarded.
11110049 v. Exclusive Diamonds : Hardship: Hardship which would
result from an order of SP is a factor to be taken into consideration in
determining what remedy to grant. They found that there would be
substantial hardship. Agreement to sell jewelry business; agreement entered
after owners wife was murdered. Argued by appellant hat the sale was
unconscionable b/c at the time it was made, owner was suffering from deep
depression. Found that his state of mind cannot alone render the agreement
unconscionable.

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McCorkell v. McFarlane: Unfairness: SP in this case ought to be refused

on grounds of unfairness in maters extrinsic to the terms of the K itself and
being found in the circumstances under which it was made. The equality and
fairness which is essential in order that the Court may exercise its
extraordinary jurisdiction in SP is to be judged at the time the K is made and
not by subsequent events. In judging fairness of a K the court will look not
merely at the terms of the K itself, but at all the surrounding circumstances.
The unfairness in this case is to be found in the circumstances of the Ds age
and impairment of faculties. P is entitled to damages.
Rescission
The important thing about rescission is it puts you in position you would have
been in if there never was a K, damages and specific performance puts you in
position you would have been in had there been no default. This is an
equitable, rather than a contract, remedy. CL made you close your deal and
sue for damages, but when that was unfair, equity stepped in. If the deal had
not yet closed you can rescind the contract if rescission is available to you
You are entitled to a rescission where there has been a
Misrepresentation that: 1) induced you to enter into the K, 2) was
material, and, 3) was relied on
Three types misrepresentations: 1) innocent, 2) negligent, 3)fraudulent
Before closing you can rescind for any misrepresentation, after closing you
can only rescind for fraudulent misrepresentation
Purchaser can also rescind K for various other things: undue influence,
duress, non est factum, breach of fiduciary duty, illegality.
Executory K vs. executed K executed K means K where the deal is closed,
executory is when youve signed but have not yet closed.
Rescision can occur where there is fraud, mutual mistake (If parties
are (both) wrong about K it shouldnt be enforced), or error insubstantialis
not getting anything (not sure bout this)
There is a lot of discussion in text of rescission vs. repudiation arises from
judges using rescission for wrong concept: Rescission put back in pre-K
position, Repudiation when a party defaults
*** In order to determine if it was a promise or representation, the court looks
at the language of the contract; look at statement, decide how you will
categorize it, and then remedies should follow. What makes a representation
material? look at the intent of the parties. Prof.- the language of the
contract can make an immaterial representation material.
Johnson v. Agnew: Clarifies difference bn Rescission and Repudiation:
it is important to dissipate a fertile source of confusion and to make clear that
although the vendor is sometimes referred to in the above situation as
'rescinding' the contract, this so-called 'rescission' it quite different from
rescission ab initio, such as may arise for example in cases of mistake, fraud
or lack of consent. In those cases, the contract is treated in law as never
having come into existence. (Cases of a contractual right to rescind may fall
under this principle but are not relevant to the present discussion.) In the
case of an accepted repudiatory breach the contract has come into existence
but has been put an end to or discharged. Whatever contrary indications may
be disinterred from old authorities, it is now quite clear, under the general

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law of contract, that acceptance of a repudiatory breach does not bring about
'rescission ab initio' This follows from the fact that, P having repudiated the K
and his repudiation having been accepted, both parties are discharged from
further performance.
Sail Labrador: SCC gets rescission/repudiation mixed up: calling a
repudiation a rescission. Involved racing sale boat leased out with an option
to purchase. There was a default. Ct had to decide whether K was over.
Bilateral contract where you have mutual promises. Cts will not strictly
enforce these promises. Unilateral contract, where one person has a right i.e.
an option to purchase P doesnt have to purchase but V has to sell. When you
exercise the option, then it becomes bilateral. Unilateral contracts will be
strictly enforced i.e. they have to be strictly performed.
Guarantee of North America v. Gordon Capital: K can specify a Right
to Rescission for breach of a Promise where no Equitable right
exists: SCC clarifies rescission/repudiation Distinction. The parties can say in
K that a failure to perform a big promise does give a right to rescind. What
the court is saying is that it will honour K where it provides the remedy of
rescission or specifically provides no remedy.
Carter: Doesnt agree with this; he thinks in such a case, the big promise is
actually treated as a misrepresentation. This mucks up the distinctions
between promises and misrepresentations. He says we can choose to
understand this either way.
Carter: On the same topic, if in the K you say no matter how big this breach
is you must close and sue for damages, we will say parties have decided
that this is a warranty and not a condition b/c in case of warranty
you must close and sue for damages. He really likes this intellectual approach
to this issue. Keep things straight.
Material Misrepresentation
Panzer vs. Zeifman: Material Misrepresentation give rise to the Right
to Rescind, however that right can be lost if Fresh Steps are taken:
Pur thinks he will be getting a private drive, but it was a mutual drive. The
contract was silent on the issue. Pur wants out of the deal. Pur says in was a
misrepresentation, whereas seller called it a title issue (title clause says it
must be requisitioned by the req date, and Mr. Panzer missed the req date.
Argument became weather it went to the root of title). Trial court sided with
seller. COA treated it as a misrepresentation, because when he was viewing
the house someone pointed to the drive and said this is where you park.
However, after you knew you had the right to rescind, you took fresh steps
as if you had a binding contract, so you lost your right to rescission.
Carter: This case can be argued from several points of view: Can say 1)
Mutual right of way look at title clause, didnt get what I was supposed to 2)
Promise issue: Didnt get what I bargained for. If its a condition I can accept
repudiation of K or take what vendor has w/ abatement 3) Misrepresentation
represented to me that I would get a private driveway
Here it wasnt in the K so court said they misled you into thinking it was a
private driveway, therefore we will find misrepresentation by silence, it was

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material, you can rescind.Panzer argued misrepresentation issue is b/c he

missed the requisition period their requisition on title was too late, therefore
they couldnt rely on all their stuff on requisition b/c it doesnt go to root of
title (although you could argue in this case that it did go to root of title). So
court gets around title issue, finds misrepresentation, and then in Carters
opinion screws case up says you Panzer affirmed K and so you cant get
rescission intellectual impression is that if you want to rescind you have to
make a decision once you know the factors and you choose to carry on K
youve given up. That sucks. This guy just went to closing and brought quit
claim deed. Why shouldnt the purchaser be able to do that and then when
vendor cant deliver decide whether to rescind or accept repudiation?

Returning Property
Wandinger v. Lake et al.: Right of Rescission Post-Closing for a
Fraudulent Misrepresentation: P purchased a property after being led to
believe it returned more profit than had been disclosed. The right to rescind is
a right which a party to a transaction sometimes has to set that transaction
aside and be restored to his or her former position. It is the equitable right to
annul the legal effect of K and to re-establish the parties to the position they
were in before the making of K. This remedy is available when a person has
been induced into making a K by material, false, fraudulent
misrepresentations. The wronged party may rescind and also claim damages
for deceit.
Carter v. Golland: Where Rescissions is exercised post-closing due to
Fraudulent Misrepresentation, the expenses of P while owning
property, any benefits they received, or any depreciation in the
value of the property, will be considered: The parties must be put in
status quo. It would be unjust that a person who has been in possession of
property under K which he seeks to repudiate should be allowed to throw that
back on the other partys hands without accounting for any benefit he may
have derived from the use of the property, or if the property, through not
destroyed, has been in the interval deteriorated without making
compensation for that deterioration. There must here be rescission. It must
be referred to the Master to take an account of the moneys paid, and to
ascertain the amount of stock on hand as compared with the stock on hand
at the date of the conveyance, and to ascertain what should be allowed to
the plaintiffs for expenses in carrying on the business and what should be
charged against them for any benefit they have in the meantime received.
The balance due to the plaintiffs will constitute a charge upon the land and
assets of the business. A reconveyance subject to the charge will be settled
by the Master
Beer v. Townsgate: When Puff becomes Fraudulent Misrepresentation
given rise to right of Rescission (unsophisticated P): The sales agents
repeated statements to both P that the investment was risk-free and
guaranteed and to P that the V would buy back the unit at any time are in the

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category of fact. That Ps were unsophisticated further supports the

conclusion that their reliance in the circumstances was reasonable.
Cole v. Pope: Exception were an Innocent Misrepresentation resulted
in Rescission Post-Closing: An executed contract for the sale of a mineral
claim, being an interest in land, will not be rescinded for mere innocent
misrepresentation. But where, by error of both parties and without fraud or
deceit, there has been a complete failure of consideration, a court of equity
will rescind the contract and compel the vendor to return the purchase
money. Thus where, on the sale of a mining claim, it turned out that the
whole property sold was included in prior claims, whereby the purchaser got
nothing for his money, the contract was rescinded though the vendor acted in
good faith and the transaction was free from fraud.
Fraud
Yamada vs. Mock: Lawyer must take Prudent Steps to Prevent Fraud
(Request ID): While solicitor should not be expected to act as guarantor,
should take reasonable steps to protect party he or she is serving. While
eliciting of ID may not prevent fraud, it would make it more difficult. Failure to
ask for ID is below standard of care of solicitors in this situation. If practice
were not to ask for ID in such circumstances, I see the risk in these
circumstances to be plainly foreseeable and, regardless of practice, the law
would impose liability on the solicitor to deal with the foreseeable risk.
Shute v. Premier Trust Co: 1) Lawyer cannot let documentation leave
your possession for execution, and 2) you cannot be blind to
suspicious circumstances (Red Flags): There were suspicious
circumstances wife sent documents to Morocco for husband to sign, and
they came back the next day, and there was no notarial seal on them.
Note: Law Society publishes lists of red flags: flips, vendor take-back, big
price increases (property doubles in 6 months), certified cheques, direct
deposits and bank drafts (supposed to call and make sure the payment is
legit only safe course is wire transfers. Banks will now wait for cert cheques
to clear before they will let you draw on it), Mrtg money only deals, acting for
multiple parties.
Indefeasibility of Title: If title is indefeasible, it cannot be taken away.
System protects an innocent purchaser so that title is reliable. Now this
system has been revised so that it is harder to sell someones house from
under them.
Concepts:
o Nemo Dat (first in time): You cannot sell what you do not own (this is
no longer the system we use for real estate, but it is the system for real
property).
o Registry (first in registration): There is an element of unfairness to
this changed this system to first in registration with notice. You also
have to satisfy yourself that the person is the actual owner search the
title for 40 years. Only applies to about 200 properties in Ontario.

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Land Titles: the government says here is the owner, and you get to rely
on it. Mirror (real title mirrors the title search), Curtain (you dont have to
look behind it; draw a curtain at the page you get), and Insurance (if
somebody looses a valid interest in property by reason of the system,
then the government is insured to compensate them). In a real title
system, actual notice is irrelevant, bc people would be forced to register.
However, if you have actual knowledge of an interest, your title can be
defeased (? Trust Case). This might apply to a tenant who has not
registered their lease.
o Exceptions to the Mirror: s. 44(1) of the Land Titles Act: claims by the
government (taxes), easement that is in use but not registered, fraud
(could lose your title if there was a fraud). Title insurance covers
fraud.

When is your title Defeasible?: Fraud Clause: You never get title if you
are a crook lose it under the fraud provisions
Is title indefeasible?: Is an innocent purchasers title indefeasible?
1.
Immediate indefeasibility (not the law in Ontario) says that if you
are on title and you are innocent, your title is protected. There is a COA
decision (Chan) where they said immediate indefeasibility was the law in
Ontario. Then formed a 5 panel COA to say it was wrong.
2.
Deferred Indefeasibility: Indefeasibility of your title is deferred one
round. If you have dealt w/ the forger, you cannot get good title. If you
have dealt w/ a fraudster, who in turn had title transferred to him by a
forger, you have good title. Durrani Case said this was the system in
Ontario. This was the law up until 5 years ago, where the 5 panel COA in
Lawrence changed the rule and the statue land titles said Ontario is a
Deferred Indefeasibility system, but then mislead the court to create a
new system, which is called Double Deferred Indefeasibility. Used United
Trust in order to rationalize their decision.
3.
Double Deferred Indefeasibility: Can only get title from an innocent
person. If you have title transferred to you by a forger or a fraudster you
do not have good title. There has to be two innocent parties for title to be
protected after a fraud i.e. an innocent person buys a house from a
fraudster and sells it to another innocent party their title is protected.
However, Rabbie says in order to rely on this, you have to have done
due diligence. Then Ratvinsky said that if you are a bank, you never
win (DDI plus) in order to rely on DDI, it must be clear that you could
not have avoided the fraud by doing something more. In this case, said
that banks can always do more.
Lawyers Responsibility (indefeasibility of title systems): Lawyers give
an opinion about title - this is not a guarantee. Lawyer acts prudently they
are not liable if title is bad. We do not give an opinion on whether the title is
indefeasible bc of fraud. Lawyer also has to take reasonable steps to prevent
fraud.
Title Insurers: They do guarantee there has been no fraud.

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Kinds of Frauds: Oklahoma (flip or value frauds, not forgeries): Fraudster

sells a house to their partner for more than it is worth in order to defraud the
mortgagee. Before Lawrence this was not a title issue, but with the recent
changes you have to have two innocent parties, or the transaction is void
fraudster one now gets the property back. Bc the mortgage is void the bank
must go outside the land titles system to recover against the property.
Identity Fraud. Certified Cheque Fraud.
There are other (common law) theories floating around:
(1) Rabi negligence on the part of the lender turns indefeasible title in
defeasible title if the court feels they didnt do proper due diligence
then that indefeasible title becomes defeasible.
(2) One Transaction treat the latter as one transaction and not two, and
as a result its like the lender is part of this fraudulent transaction and
his interest would be voided under double-deferred indefeasibility.
Forger fraudster innocent lender (treat as one transaction)
Durrani v. Augier 2000 ONSC: Deferred Indefeasibility: Durranis have
good title Mortgage (forgery) by Augier gets a foreclosure order so he
becomes owner on title transfers the properties to the two girls who are
trustees for the agent girls go out and get mortgage to the bank: Court
decided bank gets good title, found that girls did not get good title b/c they
were trustees for their mother who knew about the fraud so Durrani would
have to pay mortgage to get title back (Land Titles insurance system would
step in and give Durrani the money).
CIBC Mortgages Inc. v. Chan: Return to Immediate Indefeasibility/no
more Nemo Dat (overruled by Lawrence): Wife forged POA for husband
and secured two mrtgs against their house to pay gambling debt. Motions
judge held husband's argument to apply doctrine of deferred indefeasibility
was not supported, as doctrine did not disentitle bona fide parties from
pursuing claims to property with fraudulent title. Husband and wife appealed.
Appeal Dismissed. Court mucked up what Duranni said bc went back to
Immediate Indifeasability (but court didnt admit this). If the mortgages are
gone, then innocent husband benefits, but so does the guilty wife (court
doesnt want this). Ct analyzed LTA s. 155 and s. 78(4) looked at these and
came up with the concept that Nemo Dat isnt the law in land titles. Court
summarized deferred indefeasibility and says that fraudulent document did
not give good title to person who perpetrated fraud. In this case, the bank is
innocent and would be denied their right, and in Duranni the bank was okay,
but this is b/c of the difference of forgers and fraud. Ct in this case misses the
point. Test: are you innocent and do you have notice of the fraud? Without
calling it immediate indefeasibility they make it this (as long as you arent
party to the fraud you are ok).
Rabi vs. Rosu: In order to rely on DD & DDI, you have to demonstrate
you have done Due Diligence: Unknown individuals posed as the
purported vendors and as Ion Rosu, a purported purchaser and mortgage
applicant of the condominium unit in question.

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These individuals completed a fraudulent transfer of the condo from the

names of Rabi and Shafiei into Rosus name and then obtained a mortgage
loan from the TD Bank. Bank had not exercised due diligence to prevent fraud
and could not rely on deferred indefeasibility. You are dealing with the
fraudster and have the ability to avoid the fraud. Since you could avoid the
fraud you shouldnt be protected. Ct says moves towards a bit of a Nemo
Dat rule saying legislation did not intend to change CL except in certain
circumstances. If deferred indefeasibility applied to this case the mortgage
would be valid. Even in double deferred system, if the lender didnt to due
diligence, then they might not get title. This could be over turned.
***Bank did not have interior inspection of premises performed, instead
nelegating due diligence to mortgage broker
Lawrence vs. Wright: Double Deferred Indefeasibility: Test: Did you
take title from a crook (forger or fraudster). Transfer will not be valid unless it
was obtained from an innocent person who has registered the property
pursuant to a fraudulent transfer. So we arrive at double-deferred
indefeasibility, though the court calls it deferred. The court also explicitly
overrules Chan: The mortgagees in Chan relied on the register which
showed the parties as the registered owners. In fact, the wife was one of the
registered owners and her title was valid -- it had not been obtained by fraud.
Even if an argument can be made that, in respect of the wife's interest, the
mortgagees took from a registered owner, the same cannot be said in respect
of the husband's interest. The result in Chan, at least in respect of the
husband's interest in the property, is inconsistent with the theory of deferred
indefeasibility.
Cases that take Lawrence even further and take us away from the
theory behind the LTA:
Reviczky vs. Meleknia: Negligence on the part of the lender turns
indefeasible title into defeasible title in Double Deferred
Indefeasibility System as well: HSBC should have been more vigilant, and
as a result cant rely on indefeasibility of title. 80 year-old owned a house that
he rented out to a fraudster. Fraudsters showed house, pretending to be
owners. They forged his signature and acquired power of attorney claimed
to be a relative, Aaron Reviczky. Went out and sold property on the market to
Meleknia. Everyone agreed that Meleknia had no interest b/c bought from a
forger. Meleknia gave a mortgage to HSBC according to any theory this
mortgage should have been valid. The relevant transactional attributes now
include the determinative one: whether a party to a transaction had the
opportunity to avoid the fraud in issue. If this appears to be inconsistent with
the Land Titles Act, it should be remembered that, in Dominion Stores
[supra], the majority of the Supreme Court held that the common law
continues to be part of the law of Ontario in respect of land under the Land
Titles Act except where it is expressly abrogated.
St. Onge v. Willowbay Investments Inc.: Applies Lawrence (sort of): S
bought land from W; W then sold 6 of that land again to new purchaser (F). S
sues to assert title to the land, and F claims they are a bona fide purchaser.

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Ct treats it as a fraud because of equitable conversion. W is just a trustee for

S and when he held himself out as owner to city it was a misrepresentation.
Court says it is not a fraud but a misrepresentation F cannot get title. The
court is saying Lawrence could apply as F didnt get title from an innocent
party.
New Fraud Legislation: Govt was originally promoting deferred system,
then switched to double deferred system. People were losing their homes and
there was an outcry. Compensation was of no value b/c people were losing
their homes. But that is theory of land titles and if you take this away then
you are really going back to a registry system. Land titles inherently was set
up so that in certain situations, people could lose their homes. This became a
political issue, govt wanted a system to protect peoples homes. So created
an extra round of indefeasibility. Now we have double deferred
indefeasibility. Legislation could go further and take it beyond what govt
intended. And courts could also take this further. There is no end to where
these Lawrence things could go. Lawrence says the test is whether you could
have avoided the fraud. But this isnt what is in LTA, this is what the courts
made up.
Title Insurance
Title insurance is now available to provide more extensive and secure
coverage. Title insurance is "an agreement to indemnify, up to face amount
of policy, a specific named insured, regarding a specific interest in a specific
property, in event that loss ever arises from one or more of the specified
causes." 'A title insurance policy is a K bt title insurer and purchaser (and/or
the lender) that has been drafted by the title insurers and, therefore, like any
insurance policy, covers certain risks but also excludes others.
A title insurance company will usually offer 2 types of title insurance policies,
an "owner's policy" and a "lender's policy." An owner's policy provides
indemnification against loss or damage suffered through title defects or
encumbrances, enables owner to protect himself from the unpredictable. A
lender, who has a vested interest in property and thus wants to ensure that
property is free from title defects, is able to purchase a lender's policy to
ensure that he has a valid and enforceable charge on title.
Extent of Title Insurance Policy: Title insurers will want to consider degree
of probability that a claim will be made before selling a policy for a specific
property. A title insurance policy coverage section is drafted quite broadly in
order to cover all potential title defects. A real estate lawyer should carefully
review general exclusions and specific exceptions in a policy to discover what
losses are actually covered and whether coverage is at least as broad as a
solicitor's opinion in order that he can accurately advise a client as to the
advantages and disadvantages of title insurance in a specific transaction.
Title Insurance and the Traditional Role of the Lawyer in Land
Transactions: Traditionally, all aspects of a residential real estate transaction
have been handled by lawyer once agreement of P&S has been signed, but
most important role has been provision of a title opinion. Bt elimination of
this role and creation through mechanization and centralization of document
processing, there does appear to be a genuine threat to lawyer's role. It is
clear that some title insurers want elimination of regulation 666, which they

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regard to be only obstacle preventing title insurers from issuing policies

without involvement of a lawyer providing an opinion. In addition, problems of
conflict of interest are inherent in the situation. Lawyer, in a typical situation,
acts for P, mortgagee, and title insurer and provides legal opinions to all, at
the expense of P. Obviously, this situation will have to be sorted out.
Difference b/t non title insurance system and a title insurance
system: as a lawyer you give your opinion of title based on your training.
Where there is title insurance you are getting a contract/guarantee that title
is good. If there is an event where there is not good title, insurance company
has to pay. But if there is no insurance (lawyer opinion system) you have to
show lawyers opinion was negligently given before you can get to recover.
There is very little practical diff bt 2. Cts have tended to hold real estate
lawyers to a high standard. It is close to perfect title anyways in a lawyer
system. Cts arent supposed to know if you have insurance but often they do.
Reality, there arent many title problems that would come out that arent
covered by title insurance or lawyers insurance. Title insurance is good for
lawyers, large deductible, time wasted in lawsuit, attack on credibility.
Mortgages
Legislature and Cts seek to balance interests of mortgagor/borrower to
ensure that lack of bargaining power is not taken advantage of, with interests
of mortgagee/lender, who advances funds, that represent earned value. The
relationship turns on central loan transaction that is rendered special by fact
that repayment is secured by land, rather than being left to vagaries of
judicial system and uncertainties of debtor's economic situation in future.
Historically, a mortgage was a Conveyance of land as a security for payment
of a debt or discharge of some other obligation. The mortgage, upon payment
of debt or satisfaction of obligation, was redeemable, debtor could demand
reconveyance of land conveyed by way of security. At CL, mortgagee, as a
result of conveyance creating mortgage, became "owner" of mortgaged
property. However, in equity, an equitable right to redeem developed, and
equity enforced duty to reconvey upon payment of debt. In Land Titles
system, charge developed under a different premise. A charge arises by K but
without a transfer of title or possession of interest charged, but it has
annexed to it certain incidents by statute that it otherwise would not have
had. Charge does not vest in chargee any legal estate and hence chargor's
interest in land is not equitable but remains legal.
"Disguised" Mortgages: Part of concern for fairness wrt borrowers has
resulted in equity looking through disguised forms of mortgage. In application
of equitable maxim that substance not form of transaction is key, equity will
intervene when a conveyance, absolute in form, is intended to operate as
security only, and equity will provide to "the vendor" the usual right of the
mortgagor to redeem.
"Equitable" Mortgages: An equitable mortgage is one that does not
transfer legal estate in property to mortgagee, but creates in equity a charge
on property. Most common of these is "second" or subsequent mortgage bc
anything beyond first mortgage was viewed not as a mortgage of the legal

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estate that had been transferred to first mortgagee but as a mortgage of

ever-diminishing equity of redemption.
Mortgages and Insurance: Mortgages usually go to 75% of value. If there
is a title problem and a mortgage, borrower still has to pay mortgage. Lender
would want a survey showing location of house. Title insurance will give a
policy for cheaper than cost of a survey. So borrower will go get a lenders
policy to protect from survey problem. Advantage: traditionally a lawyers
opinion didnt insure over fraud. Title insurance does cover fraud. So now it
makes sense. Everyone in real estate business is there to reduce risk
surveyor, municipality (zoning). Theory is, when risk happens, and there is a
loss, it has already been paid for.
Alienation of the mortgagors and mortgagees interest: equity of
redemption is an alienable interest. When a home is mortgaged it is equity of
redemption that is subject to any subsequent sale of property. CL- mortgagor
cant escape liability under mortgage simply by selling property; obligation to
repay loan survives as a matter of K law. A right of indemnity will be implied
as a matter of construction in favour of original mortgagor. Mortgagee also
has an interest that can be transferred: right to enforce loan. At CL, right to
sue on debt, a chose in action is not assignable. Equity permits these
transfers.
Mortgage Remedies
There are 5 remedies available to mortgagee once default has occurred:
Bring an action against the mortgagor on the personal covenant, Take
possession/Appoint a receiver, Foreclose, Sell the land (Power of Sale or
Judicial Sale)
Action on the Covenant: Sue (usually when the borrower has assets).
Umbrella term personal covenant can be used to refer to set of K promises
made by mortgagor. Key term is promise to repay loan. amortization is a
term describing the time required to pay off the debt (including interest) were
the blended payments to run their full course.
Taking possession or appoint a receiver: The way the lender takes
position of the secured property. Usually you need possession to sell it. Two
ways to get possession: self-help no one is in the property and you change
the locks, or through the courts if someone is living in the house.
Receivership: Another way of taking possession. Instead of the mortgagee
taking possession you appoint a receiver. You can do this contractually (a
private receiver), or the courts can consent or order it (a court appointed
receiver). A private receiver is considered in law the agent of the borrower
not the lender in terms of caring for the property. In practice, the lender
becomes liable because the receiver would demand on indemnification.
However, when a private receiver takes remedies against the property they
are the agent of the lender. A court appointed receiver is an officer of the
court there to protect everyone. It is very expensive to have a court
appointed receiver it would really only be done for a large corporation with
lots of property, or a property with sever environmental problems.
All of these remedies are based on the abolished fiction that a mrtg
conveys the property to the lender. Mrtgs today have a contractual right

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of redemption that states that once the promise to pay is fulfilled, they get
the property back by automatic defeasance. This is a mrtg concept it is
not a conveyance back, it means that as a matter of law the contract
automatically ends. It deems the conveyance to the lender had conceptually
not occurred as a matter of law. The lender is in law the owner, but the
owner is the beneficial owner with the right to redeem the right to tender
the amount owing to the lender and have the conveyance defeased and get
the property back. You only need this equitable right to redeem if you loose
the contractual right to redeem.
Foreclosure (and redemption): Used less than power of sale in modern
Canada (1% or 2% of the cases). The concept of foreclosure is central to the
mortgage it is a matter of law, not contract. When a foreclosure takes
place, the lender becomes the owner of the property. Historically, foreclosure
was a catastrophic remedy, not only did the lender get the land; the debt was
not whipped out. Because foreclosure is an equitable remedy, the courts
have the power to undue it as long as no third parties are prejudiced (there is
only a handful of cases where this has occurred). A lender would exercise
this option if they want the property the law is set up generally so the
lender does not get the property, and if the lender is going to make a profit
the courts will generally stop it convert to judicial sale. A lender may want
the property if they believe the market will recover and they were get the
money back in the future, or maybe if the property is a trophy property and
they just want it.
o Action taken in the courts is a claim for foreclosure the borrower can
give notice to defend, a notice desiring the opportunity to redeem where
they can get 60 days to come up with the money, or a notice desiring the
opportunity to sell (judicial sale). You may get a summary judgment on
the defense, or be granted the 60 days or the right to sell.
o What are the arguments for the lender and foreclose: Positive: you
become the owner, if the land is worth more than the debt you get the
profit (not really, probs wont get it if borrower/other lender are paying
attention), you can fix it up and make a property, you cant get sued once
you finish a foreclosure bc it is court supervised. Negative: you pay land
transfer tax, you lose all other security for the debt, there may be a
shortfall bn the property and the covenant to pay, if the cottage is worth
more you will not likely get it, it takes a long time to foreclose (6 months
to years), which can also make it very expensive time and expense, and
the risk of judicial sale, are why this is not the most exercised remedy.
Sale: Power of Sale: It is the right of sale of mortgaged lands that, in end,
is often mechanism that winds up being used to obtain money due under a
mortgage in default. In ON a K power of sale is implied under statute.
mortgagee may sell property as is; no obligation to improve it to make land
more attractive on market. The law states that when the 1 st position lender
sells the property by power of sale, everything behind the mortgage in
priority is removed from title. If the 1st position lender recovers more than
that which they are entitled to, the excess goes to the lender in second
position. There is also a statutory pos in the mrtg act that can be granted
and exercised. The lender can sell their legal title, but the borrower would
retain their equity of redemption, so the power of sale system fixes that in
the law as soon as the lender enters into an agreement of P&S, but the

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borrower will likely out in a contractual clause saying that if the borrower
shows up with the money before closing, they dont have to sell. Lagozo
this does not give the borrower the equity of redemption, but rather gives the
lender the right to terminate. However, if a conditional agreement gets
terminated, the EoR returns to the borrower until a new agreement is signed
and ultimately executed.
Pros: Cheap contractual remedy in the mrtg which does not require and
action in court, fast can be through the process in 90-100 days, dont
give up the covenant if you suffer a short fall, you dont give up your
other security, you dont pay land transfer, other parties cannot get an
injunction to stop a power of sale can only sue after the fact once they
have the money
Cons: Must follow all the rules or you can be sued for improvident sale:
1) send a notice to everyone with an interest to wipe out their EoR, 2) you
must wait 15 days from the default, and you must give interested parties
35 days to give them a change to redeem you, 3) you must get fair
market value to attempt to take care of subsequent encumbrances, if you
sell for less than its worth you are liable unless you can prove you took
reasonable steps (get appraisals, list it for sale with an agent, cant take
first offer without negotiation) however, someone has to have money to
sue you for an improvident sale. You dont make a profit, this did not go
through the courts so there may be litigation, you may have to go to
court to get possession, cant fix the property unless you can increase the
value dollar for dollar.
Judicial Sale: The court gives you a judgment for sale, he says sell the
property, come back, and I will make all the decision. Judicial sale may also
be involved in family fights over real estate. Pros: No land transfer bc you
dont become the owner, gets adjudicated in court so the process resolves
disputes, if there is a shortfall you havent given up your covenant so you still
have remedies, you dont lose your security in other assets; Cons: its time
consuming and expensive (power of sale is quicker and cheaper), you cannot
get a profit (but you probs wouldnt be able to anyway),
The interrelationship of remedies: There is no obstacle to mortgagee
relying on any or all possible remedies contemporaneously. While all of
remedies may be pursued, following 1 course of action can wind up
precluding others.
Relief from acceleration: As a general matter ability of mortgagee to
continue on a campaign of enforcement is predicted on ongoing default of
mortgagor. Mortgages frequently provide that on default entire indebtedness
becomes due, or is accelerated. With full debt thundering down on
mortgagor ability to rectify deficiency is obviously going to be impeded.
The Interest Act: Act is designed mainly to promote full disclosure of
liability for interest assumed by a borrower. Under what is called a closed
mortgage, borrower is not entitled to pay off principle sum totally before
maturity date of mortgage has arrived.
Lien: general kind of security interest, it can attach to either chattels or to
real property and essentially it is a response to typically work done. Lien
attaches to real property when there is work done on real property. It
provided for a K in which the transfer of property was deferred to some future

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time when payment was made (a sale on condition of payment). The buyer
could have possession in the mean time.
Right to Redeem: I you are late one day on your mrtg payment, you have
lost your contractual right to redeem. However, they retain the equity of
redemptions, which is an equitable remedy so that people dont loose their
houses for being late a day. The right of redemption is a property right, so it
can be protected in equity. This is a forever system equity will always
allow you to pay off the debt and get the property back. But, bc equity is a
fairness system, this was unfair to borrower bc they cannot be expected to
wait around forever. So, equity created foreclosure, which in time, terminates
their equity of redemption. A mortgagee in second position does not get
legal title to the real estate, but instead gets the first mrtg of redemption.
That means it has the right to pay out the first mortgage steps in the shoes
of the owner. However, the owner still have the equity of redemption interest
in the second mrtg, so they can pay off mrtg 2, then get the eor on mrtg 1
back and pay that off (although its more confusing bc they can really still deal
with mortgagee 1). If the first mortgagee forecloses, the 2 nd mortgagee loses
their RtR, and the owner loses their RtR on the 2 nd mtrg. If the 2nd mortgagee
forecloses on the property, they become the owner subject to the 1 st mrtg.
Basically, foreclosure affects the equities of redemption. The government
had to come up with a mechanism to let the world know automatic
defeasance has occurred = discharge of mrtg.
Charge: New term. Used in the land titles act.
Battle between borrowers and lenders.
Amortization: if you make you payments every month for the amortization
period you will owe nothing at the end. Result of this is that in first 60% of
amortization you are paying off more interest than principle and at end you
are paying off more principle than interest.
Mortgage: is a promise to pay a debt (the borrower) and secondly it is
security against the land of the borrower.
Borrower at any time can show up with cheque and equity would force lendor
to defease the mortgage. If the contract doesnt permit to pay ahead of time
then equity wont step in.
How to get security in the land:
Mortgage (Fixed Charge)
Debentures (Floating Charge): Mrtg. + security against personal assets;
usually when it is a business. The key to a floating charge is that it does no
become fixed to physical objects until default. That way, the owner can deal
with their inventory freely unless they default. Since the personal security
act, GSAs have effectively replaced this, but you have diff remedy systems
bn land an personal property.
Assignment of Leases: A lease is an interest in land, and when you are a
lender you want to be able to sell that income stream should the borrower
default. That is complex bc the rental stream is a personal property.

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***If you get security in two items (land and/or personal property), once your
loan is satisfied you lose all other interest under the personal security act.
How to get security in the personal property (chattels or rights
associated w/ the business):
General Security Agreement
Assignment of leases, contract, rents
Pledges (i.e. shares in the company)
Guarantee: promise to pay by someone other than the borrower i.e.
parents. They are treated as a protected person in the law, and they
get better defenses than the primary borrower.
***Lenders often want to secure their loan more than one way. Lenders also
want the ability to take over all valuable assets that compliment the property
i.e. hotel reservation system w/ hotel. When the lender wants to take
remedies, they have to decide which guarantee to action.
Planning Act
***Dont bring the Planning Act unless you are specifically asked
How to approach a Planning Act Question:
1. Is land in a registered plan of subdivision (has an M-####)?
a. Yes 50(5); Go to Q. 2
b. No 50(3); Go to Q. 3
2. Is it the whole of the lot or block (lot is where you build your
house, and blocks are everything else)?
a. Yes you are out of the Planning Act (the municipality has already
vetted it)
b. No go to Q. 3
3. Is it a prohibited transaction?
a. Will the transaction involve a conveyance of land?
b. Will the transaction involve mortgaging land?
c. Will the parties enter into an agreement of purchase and sale?
d. Will there be a use of land for more than 21 years (add in options to
extend)?
e. Is it an easement for more than 21 years?
f. If the answer is YES to any of these, they cannot be done unless they
comply with the Planning Act, so the Planning Act applies.
g. If the answer is NO, you are out of the Planning Act.
h. Assigning a mrtg is not a prohibited transaction, so the vendor can
take a mrtg on the land and assign it to the bank if they are seling
land to their neighbor that will merge.
4. Are there abutting lands (does not apply to
easements/lease/mortgage lending over abutting lands)?
a. Does the person conveying the land, giving the mrtg, granting the
use of the land for more than 21 years, own any abutting land not
including in the transaction? (do no care if the purchaser, lessor,
mortgagee, owns any abutting land). Trying to figure out if the land is
being subdivided illegally.
b. What are abutting lands? Lands that abut vertically abut on the plan
view, lands that abut horizontally include land you sell under the

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plan view (i.e. subway tunnel) to not breach the Planning Act. The
horizontal rule was developed for mining claims.
c. Say specifically what you think are the abutting lands
5. Are there exemptions (see s. 50: 50(3), 50(5), 50(2), 50(9),
50(22), 50(21), 50(14))?
a. Government
b. Consent (applies to small subdivision of land, larger subdivisions need
a plan of subdivision)
c. In a subdivision, if your abutting lands are the whole of one or more
lots or blocks within the plan of subdivision or another plan of
subdivision, you do not breach the planning act
d. In a subdivision, if the only reason you dont own the whole of the
lot is bc the municipality took part of it from you, you have an
exemption
e. Horizontal abutting exemption
f. Mining rights
g. There is exemptions for leasing floors in your building, which
technically breaches the Planning Act (if there is anything outside of
the building like surface parking, you do not get the benefit of this
exemption).
h. Prescribed statements - If you breach the planning act by selling part
of what you own, if you put a statement in the agreement saying you
will comply with the planning act before the transaction, thats ok.
Every agreement has this clause just in case, except if oral
agreements, which would be unenforceable wo this clause if there is a
subdivision
i. Once a consent, always a consent once you get a consent for a
parcel of land, it continues to be conveyable, as long as it is the
identical parcel of land. Unless, the consent says this is a one time
consent.
j. A condo projects, subdivision, or consent cures historical breaches.
k. If there is a breach of the planning act there can be no conveyance,
so if there was a historical breach, it would affect title until it is
corrected. However, it can be hard to cure title to land you do not
technically own. If there is a plan of sub, a consent, a condo, the
breach was pre-1967 or 1970 and there was no bylaw, then the prior
breach is cured. If the vendor and lawyer, and pur lawyer sign
statements saying they were not aware/did not discover a breach of
the planning act then prior breaches are cured (50(2)?) - once you see
the statements on a transfer, you dont have to look behind it.
l. 50(6) subdividing, you get a consent for what you are conveying. If
you are conveying the remaining lands, the consent for the first
parcel makes it possible to convey the subdivided lands. Consents
only last a year, but you can convey your land o yourself in order to
extend it.
Important Dates:
July 15, 1967 if a breach occurred before this date, they were
automatically cured by statue. Before 1970, municipalities had to opt-in an
apply the planning act to their jurisdiction. In 1970, Ontario said it applies
everywhere despite whether they have passed a bylawUp to 1968, there was

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a 10 acre exemption if the lands retained were more than 10 acres, the
planning act did not apply.
If you are out of the Planning Act at any point, the answer is that
there is no breach of the Planning Act.***A whole of a lot on a
concession (not a subdivision) is irrelevant from the Planning Act***If you
breach the Planning Act, you get nothing

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