December 17, 2024
We have written previously about how damages are typically assessed when the deal does not close due to the fault of the buyer.
Everything we said in that article remains true for most cases.
THE ISSUE
As with most legal principles, there are exceptions to the usual rules, because some cases have exceptional facts. Today, we write about one such case.
THE CASE
The Bonners ,the seller in Bonner v. Gill were able to sell the home to the buyers without taking a lower price a few days later than the original closing date. Therefore, the normal rule of damages entitling the seller to the difference in the prices (plus carrying and legal costs) did not apply.
So why did they sue?
As often happens, the Bonners were relying on the proceeds of their sale to purchase another home the same day. When the deal did not close on time, they had a problem.
The solution was to extend the time for closing of the purchase. However, the person selling the house to the Bonners required a $75,000.00 increase in the price to accommodate the extension.
The Bonners claimed this amount from their buyers. The buyers defended on the basis that the damages were “too remote”, in other words, that they were unexpected consequences of the breach of the agreement to close on time- the buyers were not told that the Bonners were purchasing another property with the same closing date, or that the Bonners were counting on the funds from the buyers to close that transaction.
The trial judge found in favour of the Bonners. There are two rules for remoteness of damages for breach of contract:
- The damages must be fairly and reasonably considered either arising naturally, e., according to the usual course of things, from the breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.
OR
- If the defendants were made aware of special circumstances that would alter the expectations of the parties regarding the damages they could reasonably contemplate, then the damages would be “the amount of injury which would ordinarily follow from a breach of contract under these special circumstances.”
The fact that the buyers did not have actual knowledge that the Bonners were relying on money or would be required to pay the extra $75,000.00 ruled out the “special circumstances” branch of the tests. So, the judge had to determine:
- When you buy a house, do you fairly and reasonably expect that the seller may need the funds for another transaction? That is, if you have not been told the sellers will need the funds for another transaction, should you expect that they will?
- Should you reasonably expect that the seller will need the funds on the very same day of closing?
- What should you expect the seller might lose if you fail to close?
The judge looked to an Ontario Court of Appeal decision from 1998, which in turn adopted the reasoning from an earlier case from British Columbia. The British Columbia had no trouble answering “yes” to the first question.
The judge pointed out that each case turns on its own facts, and on the facts of the Bonner case decided that it “is common knowledge that the ability of a homeowner to move to a new property frequently hinges on her ability to sell her existing one.”
Further:
it is not unreasonable for parties to real estate deals to coordinate closing dates on more than one deal. This allows parties to avoid expenses such as bridge financing, short-term accommodation, storage costs, and extra moving costs.
The Bonners recovered the $75,000.00.
TAKEAWAYS
- most cases turn more on the facts than the law
- judges will use common sense to take judicial notice of well known facts
- the damages will be tailored to the specific facts of the case.
WHAT WEILERS LLP CAN DO TO HELP YOU
The real estate section at Weilers LLP carries on our proud tradition of advising clients about the risks and obligations that they are accepting before they sign a contract.
If difficulties arise, we work with our clients and their other advisors to attempt to resolve the problems.
If the problems cannot be resolved on a friendly basis, then our litigation lawyers may be able to assist with damage control. If there is a question about how to calculate or prove damages, we have the benefit of having Brian Babcock as counsel. Brian has taught the course on Remedies, including damages, numerous times at the Bora Laskin School of Law.
We know the law of damages, the rules of evidence, the art of advocacy, and how to blend them together to get your best possible results.
Our litigation team works well with outside real estate lawyers who do not do litigation, as well as with our own clients.
If you find yourself needing advice about your risks or obligations under a real estate contract, it is best to seek the advice early. Feel free to give Weilers LLP a call and see if we are the right lawyers for you.