Legal Blog

Good Faith

2336574 Ontario Inc. v. 1559586 Ontario Inc. Ont SCJ

Parties entered into an agreement of purchase and sale for a commercial condominium. There was an interim closing. The builder vendor then set a closing date, as it was entitled to do. The purchaser requested an extension without giving reasons and the vendor refused the extension without giving reasons. The closing date came and, after a partial tender, the vendor’s lawyer claimed that the purchaser was in breach. The next business day, the purchaser’s lawyer notified the vendor’s lawyer that the purchaser would be in funds a day later and would complete the transaction. The vendor refused to close and claimed the $70,000 that the purchaser had previously paid. Each claimed that the other failed to act in good faith. The judge noted that good faith depended upon the relationship of the parties. If the parties had a long-term, ongoing relationship, a level of good faith might have been flexibility beyond the letter of the contract. However, commercially experienced buyers and sellers in a one-off transaction would not be expected to vary from the strict contractual terms. Accordingly, the judge held that the purchaser breached the agreement and that the vendor properly terminated it. The judge awarded the vendor the deposits of $40,000, but held that the $30,000 occupancy closing amount was not a deposit; rather, it was a payment towards the balance due on closing and had to be returned because there was no closing.

Written by Jonathan Speigel Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.