C.A. Says Purchaser of House Bound to Complete Deal

contract.jpg  Today, the Court of Appeal released a short ruling in a case involving a disputed real estate transaction. Its reasons are of interest to practitioners in contract law generally, since they show a marked reluctance to allow a party to get out of a written contract without good reason.

Ball v. Hardy was an appeal from a decision of Justice Albert Roy. It arose out of a real estate transaction, in which, after a couple of days of negotiation,  the parties had prepared and executed a handwritten agreement of purchase and sale. Neither had consulted a lawyer, but they had agreed to do so the next day, in order to proceed with the transaction. The purchaser paid a deposit to the vendor.

However, the next day, the purchaser said that she wanted more time to think about the deal. Ultimately, she refused to close the transaction and the vendors sued for specific performance.

At trial, Justice Roy found that the handwritten agreement contained all of the elements needed to make it enforceable. He also found that there was no undue influence or duress by the vendors against the purchaser and that the agreement was not unconscionable. He ruled that the sale price had been reasonable.

Despite these findings, the trial judge had refused to order the purchaser to go through with the transaction. As the Court of Appeal noted, “In so doing, he appears to have relied upon a lack of consensus ad idem and the defences of mistake, non est factum and unconscionable conduct due to inequality of bargaining power.”

However, the Court said that this decision could not stand, in the face of the lack of evidence to support it:

The vendor is a literate and educated woman with no physical or mental condition that would interfere with her ability to enter into a valid agreement. While the circumstance of negotiating and entering into a handwritten agreement of the sale of land without the involvement of a real estate agent or a lawyer is certainly unusual, there was no evidence that the vendor did not understand the nature of the document she was signing. While there was some evidence given in her cross examination that the vendor may have thought that the agreement would not be binding until the parties had seen a lawyer, the evidence is clear that she knew that the purchasers thought that they had bought the property. She did nothing at the time to suggest the contrary.  

While the Court acknowledged that its decision was “most unfortunate for the purchaser”, it held that the vendors were entitled to enforce the handwritten agreement.

The decision is somewhat reminiscent of a 1997 decision of the Court of Appeal, in Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (too old to link to, unfortunately). There too, the Court of Appeal upheld a written contract in difficult circumstances. The Fraser case concerned a contract to install a burglar alarm at a jewellery store. The contract contained a provision that limited the liability of the alarm company (which also monitored the system) to $890. While a robbery was in progress at the store, the owner activated a silent alarm, which signalled the alarm company. However, the company was so slow in responding that by the time it notified the police, the jeweller’s employee had already done so and the thieves had gotten away with jewellery worth $50,000.

The jeweller sued the alarm company. The trial judge awarded to the jeweller the full amount of its loss. But on appeal to the Court of Appeal, the award was reduced to $890, the amount provided for in the limitation of liability clause.

The jeweller argued that the contract was a pre-printed form, in small print, and that he had not noticed the exclusion clause. In fact, the trial judge had found that the jeweller had not read the contract, that the limitation of liability had not been drawn to his attention and that there had been an inequality of bargaining power. But the Court of Appeal said that these factors “are either immaterial to the issue or, on the facts of this case, not such as to render this limitation clause unenforceable”. In strong language, it stressed the importance of parties being held to their agreements:

As a general proposition, in the absence of fraud or misrepresentation, a person is bound by an agreement to which he has put his signature whether he has read its contents or has chosen to leave them unread. Cheshire, Fifoot & Furmston’s Law of Contract, 13th ed. (1996) at p.168. Failure to read a contract before signing it is not a legally acceptable basis for refusing to abide by it. A businessman executing an agreement on behalf of a company must be presumed to be aware of its terms and to have intended that the company would be bound by them. The fact that Mr. Gordon chose not to read the contract can place him in no better position than a person who has. Nor is that fact that the clause is in a standard pre-printed form and was not a subject of negotiations sufficient in itself to vitiate the clause.

Today’s ruling in Ball reaffirms that the Court of Appeal does not take written contracts lightly.

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