Seller awarded $230K in damages following unsuccessful home sale

QUICK HITS

 

• When the buyers of a $937,400 home backed out of the deal, they claimed the contract was void because deadlines had been missed.
• The court found that their actions—like paying deposits and not cancelling the agreement earlier—showed they intended to proceed until they later breached the contract. 
• The seller was awarded $232,400 in damages, the difference between the original price and eventual resale price. 

When a buyer fails to complete the purchase of a property, disputes often arise over who is at fault. In some cases, buyers may argue that the seller breached the agreement by missing deadlines. In such cases, the doctrine of repudiation of contract comes into play. It requires an objective evaluation of both parties’ actions, as demonstrated in the case Vandermolen Homes Inc. v. Mani.

Key facts of the APS

In January 2022, the defendant buyers signed an agreement of purchase and sale (APS) for the purchase of a single-family home in Exeter, Ont. from the plaintiff builder for $937,400, with a scheduled completion date of Aug. 31, 2022. The buyers paid a deposit of $5,000 upon signing.

The APS was conditional upon approval by the buyers’ lawyer and arrangement of suitable financing. The deadline for confirmation of the fulfillment of conditions was 6:00 pm on Jan. 20, 2022. A further deposit of $88,740 was due upon removal of the conditions.

On Jan. 20, 2022, the buyers offered to extend the conditional terms to Jan. 26, 2022.  The offer to extend was stated to be irrevocable until 11:59 pm on Jan. 21, 2022, failing which the offer to extend became null and void. The seller did not sign the confirmation of acceptance until Jan. 22, 2022. On Jan. 26, 2022, the buyers nevertheless signed a waiver of the conditions and paid the second deposit.

Breakdown in communication and escalation

Nothing further occurred until May 2022, when the seller began to email and text the buyers regarding interior decor selections, with no response. A dispute subsequently arose over whether the buyers had received these emails and texts.

The buyers took the position that since they heard nothing from the seller for several months following Jan. 26, 2022, they assumed the deal was not proceeding. However, there was no evidence that the buyers contacted the seller to request the return of their deposits or to notify them that they did not intend to complete the purchase during that time period.

On Aug. 10, 2022, the seller’s real estate lawyer wrote to the buyers’ lawyer asking how they intended to take title. On Aug. 12, 2022, the seller spoke to one of the buyers regarding a pre-delivery inspection. The buyer advised that he needed to speak to his wife (the co-buyer) who was in India at the time. He gave no indication that the purchase would not be completed.

Repudiation of the agreement and market impacts

On Aug. 17, 2022, the buyers contacted the seller and cancelled the pre-delivery inspection, which was scheduled for later that day.  On the same day, the buyers’ lawyer advised the seller for the first time that they would not be able to complete the purchase.

On Aug. 29, 2022, the seller’s lawyer spoke to and emailed the buyers’ lawyer to confirm whether or not the buyers were going to complete the transaction. The buyers’ lawyer confirmed that his clients were unable to close the transaction and requested that the property be re-listed so that “the damages can be lessened”.

The seller retained a Realtor and listed the property for sale for $849,000, but there were no offers. In February 2023, the price was reduced to $799,900, without success, and in April 2023, the listing price was dropped to $749,900. While conditional offers were received, the property did not sell.

In September 2023, the price was reduced again to $724,900 and the property was finally sold for $705,000 in October 2023.

The seller sued the original buyers for damages of more than $175,000 relating to their breach of the APS, and brought a motion for summary judgment, arguing that this was a straightforward case of buyers’ remorse.

In response, the buyers took the position that the APS was “dead” when the conditions in the APS were not fulfilled by Jan. 21, 2022. As a matter of law, they pointed to the term in the APS which stated “time is of the essence”, which generally means that a time limit in an agreement is essential, such that breach of the time limit will permit the innocent party to terminate, or rescind, the contract.

Prior decisions have held that the effect of a party’s repudiation of an agreement depends on the election by the non-repudiating (or “innocent”) party as to whether or not to terminate the agreement. If that party treats the contract as still being in full force and effect, the contract remains in force and effect for both sides.  However, if the non-repudiating party accepts the repudiation, the contract is terminated, and the parties are…