Importance of the Size of the Deposit

Posted on: Friday, February 3rd, 2017

Go Big or Go Home?
The Importance of the Size of Deposit
In the case of Bianchini v. 1670948 Ontario Inc., 2016 ONSC 7367 the Ontario Superior Court of Justice was required to consider whether or not clear and unequivocal acceptance of an anticipatory breach by the purchaser was established by the vendor. This would determine how the $80,000 deposit on the transaction would be allocated. In the end, the court provided that acceptance of the breach had occurred and the deposit was ordered to be paid as damages to the vendor.

This case concerns a real estate transaction in which an initial deposit of $10,000 was paid to the purchaser, with an additional $70,000 deposit paid after the financing condition was waived in order to make the agreement firm and binding. The agreement firmed up November 14, 2012 and it was agreed that closing would take place on April 3, 2013.

In the afternoon on the closing date, the purchaser’s lawyer emailed the vendor’s lawyer stating that “[o]ur client has not yet received confirmation of the financing and will not be able to close today.” The vendor’s lawyer responded shortly thereafter with a letter indicating that his clients were “ready willing and able to complete this transaction and are not willing to extend closing. It is therefore our position that your client is in breach of the Agreement of Purchase and Sale, the deposits are forfeited and our clients reserve the right to sue for any additional damages”.

The parties did not dispute that the email notification from the purchaser’s lawyer was an anticipatory breach of the agreement. However, there was a dispute as to whether or not the contents of the letter from the vendor’s lawyer was an unequivocal termination of the transaction.

One of the contextual factors that surrounded this dispute was the fact that the real estate agent claimed that the purchaser had indicated, on the day of closing, that she was willing to extend the closing date but would not accept a vendor take-back mortgage. Three days after the closing date, the realtor stated in his affidavit that the purchaser contacted him and indicated that she was prepared to wait two weeks in order to facilitate closing. The purchaser, however, claimed that she was only willing to accept a new agreement with a new closing date on condition that evidence of financing could be provided, as she was under the impression that the previous transaction had been terminated. These alleged events would have an impact on whether clear and unequivocal acceptance was established.

Position of the Parties
The vendor submits that there was clear and unequivocal acceptance of the anticipatory breach; thus the agreement was terminated and they were entitled to damages.

The purchaser submits that the email from the vendor’s lawyer on the closing date was not a clear or unequivocal indication that the agreement was at an end. Further, it was argued that the discussions that had occurred between the real estate agent and the vendor resulted in the acceptance of the anticipatory breach being less than unequivocal.

The main issue in this case was summarized by the court as “whether or not the vendor gave clear and unequivocal acceptance of the purchaser’s anticipatory breach.” Deciding this issue would determine whether or not the vendor received the $80,000 deposit as damages or whether it would be returned to the purchaser.

Further, the court was required to consider whether the actions of the vendor had the effect of negating/ contradicting her lawyer’s letter “to the point where acceptance of the anticipatory breach is less than clear and unequivocal.”

At the outset of the court’s analysis, it was stated that “the law is clear that where a vendor has committed an anticipatory breach, tender is not required, the purchaser is relieved of his/her obligations under the contract and entitled to damages.” The court then went on to consider the issues.

The court stated that the letter from the vendor’s lawyer on the closing date provided clear acceptance of the anticipatory breach and further indicated that the deal would not be extended and that damages would be sought. This letter was deemed to have finalized the vendor’s position despite the alleged discussions that occurred between the vendor and the real estate agent on the day of closing and three days after.

Another important point noted by the court was that the realtor was acting on both sides of this deal. In the court’s opinion, this affected the agents credibility as he had motive to push for the completion of the transaction between the two parties. Due to the ambiguity surrounding the discussions that took place between the agent and the vendor, and the credibility issues, the court determined that this factor would not create a waiver or result in the letter as being less than unequivocal.

Overall, the court held that there was indeed clear and unequivocal acceptance by the vendor of the anticipatory breach by the purchaser. As such, the $80,000 deposit was ordered to be paid to the vendor as damages. Additionally, the purchaser was required to pay $15,000 in costs.

The key take away from this case for realtors and clients to understand is that the size of the deposit is a very important aspect to consider at the outset of a transaction. This will have an impact on the amount of damages that can be claimed in the event of a breach. Generally speaking, a larger deposit is considered desirable, especially in a hot housing market such as Barrie where the size of the deposit may increase the likelihood of the acceptance of the offer and will also indicate a stronger level of commitment from the purchaser. However, in the event of a breach, this can have significant implications on the defaulting party.

The full case can be accessed at the following link:

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