December 11, 2022

By Mark Mikulasik

Lawyers are taught in their first year contracts course that one of the essential elements of any contract is an agreement as to price. Not everyone goes to law school, which is good.

THE ISSUE

But everybody needs to understand that without an agreement as to price, you have no contract.

THE CASE

Downey v. Arey is an example of what can result. In that case, Miss Downey and her partner claimed that Miss Downey’s father, Mr. Arey, had orally agreed to sell them the Arey family home. Mr. Arey admitted that there was an oral agreement of purchase and sale, which got around the statute of frauds problem[1] but he claimed that the sale price was to be $850,000. He said that the home was worth $950,000 and that the $850,000 price reflected a $100,000 “family discount”.

Miss Downey, on the other hand, said that the $850,000 was the fair market value and that she was entitled to purchase for $750,000 with the “family discount”.  She said that the purchase price was to be shown as $850,000 but that Mr. Arey had agreed to gift Miss Downey $100,000 prior to closing.

THE RESULT

The trial judge concluded that each of the parties honestly believed their version of the agreement as to the price. This meant that the parties had not agreed on a price, a fundamental term to any contract. Therefore, there was no contract to enforce.

Because the Court of Appeal will very seldom overturn a finding of fact by the trial judge, this result was upheld on appeal.

TAKEAWAYS

  • An agreement as to price is necessary to create a valid contract. The court will not “make a contract for you” if this is missing.
  • Although oral contracts generally are enforceable, one of the best reasons to put them in writing is to make sure that you agree as to the essential terms.
  • Putting the contract in writing will also make it easier if you have to sue to enforce the contract.
  • It makes no difference that an agreement is between family members. We see increasing incidents of disputes between family members.
  • One of the benefits of having the written agreement is it often can salvage the relationship by preventing arguments over credibility. We never like to see family members calling each other liars.
  • An agreement of purchase and sale for real estate is often the most important contract that the parties will sign in their lifetimes. It is important to get it right.
  • If you do not have a realtor involved, it is worth spending a few dollars to have a lawyer professionally draft an agreement.
  • Real estate lawyers typically have the experience and expertise to make sure that both parties are protected (though the lawyer drafting the agreement can only take instructions from one party. Representing both parties is a conflict of interest and independent legal advice for these second party is always a good idea.)
  • Traditionally it is the purchaser or their representative (real estate agent or lawyer) who prepares the offer. In that scenario the seller should get independent legal advice.

WHAT WEILERS LLP CAN DO TO HELP YOU

The real estate lawyers at Weilers LLP can help you by drafting your agreement of purchase and sale. We can also review any draft agreement purchase and sale prepared by a realtor or the other party themselves. We understand the importance of creating a valid contract and setting out the terms clearly and definitively so that disputes are avoided.

If you find yourself in the unfortunate position of having to go to court over an agreement of purchase and sale for real estate, the litigation team Weilers LLP has experience in real disputes. That experience and knowledge mean that we could be the right lawyers for you.

[1] The Statute of Frauds is an Ontario statute imported from Merry Olde England. It attempts to protect people from fraud by requiring certain contracts, including those for the sale of land, to be in writing. There are many exceptions, found in cases not the legislation, so if you just read the statute, you will be misled as to the actual law. It is just one of many examples why you should have a lawyer prepare important contracts.