Legal Blog

Part Performance

We all know about the Statute of Frauds: a contract for the sale of land must be in writing. We also know that the exception to the general rule is the doctrine of part performance. The Ontario Court of Appeal has written several decisions explaining part performance. One of the most recent is in 2730453 Ontario Inc. v. 2380673 Ontario Inc. 2025 ONCA 112, leave to appeal to the Supreme Court of Canada refused.

Trial Findings

The trial judge found that (i) in September 2019, a seller orally agreed to sell lands it owned to a purchaser for a price of $4.1 million, closing on or before January 8, 2020, (ii) after the parties made their agreement, they engaged in a process toward closing, (iii) on the closing date, the purchaser tendered the required documents and funds, (iv) the seller refused to close without legal justification, and (v) referring to conduct leading up to and at the aborted closing, the doctrine of part performance applied. The trial judge ordered the seller to specifically perform the oral agreement.

Only Issue

The doctrine of part performance has both an evidentiary and a detrimental reliance aspect (i.e. the party must take steps to perform its obligations contained in the oral agreement and the party must irremediably have acted to its detriment in taking those steps.)

The purchaser retained a lawyer and the purchaser’s lawyer did what all good lawyers are supposed to do to close a large land transaction. The only issue for the appeal was whether the facts set out below satisfied the detrimental reliance aspect of the doctrine of part performance. In essence, did the conduct on which the trial judge relied involve the purchaser irremediably acting to its detriment in performing its obligations?

Basic Facts

The trial judge had relied on the following facts, which were not in dispute in the appeal:

1. The purchaser:

• obtained an environmental assessment and survey and conducted title searches;
• conducted other due diligence;
• negotiated and prepared the commission agreement among the purchaser and the brokers;
• retained legal counsel to close the agreement;
• drafted, revised, and negotiated the written agreement of purchase and sale;
• delivered the documents required on closing; and
• obtained and tendered the certified cheque for the full purchase price.

2. For its part, the seller:

• retained legal counsel to close the agreement;
• negotiated the status of the easement;
• reviewed and revised the draft agreement;
• provided draft copies of its closing certificate and statutory declaration and then executed those documents; and
• negotiated the method by which the purchaser would deliver the agreed purchase price on closing.

These were enough for the trial judge to conclude that there were various acts of part performance relating directly to the property and directly tied to the oral agreement. He also concluded, without analysis, that, in carrying out its acts of part performance, the purchaser acted to its detriment.

Appeal

The seller argued that (i) the purchaser had only one obligation under the oral agreement: pay the purchase price on closing, (ii) although the purchaser offered to pay the funds and tendered a cheque, payment was never accepted, and therefore there was no detriment, and (iii) the other conduct on which the trial judge relied therefore did not involve performance of the agreement’s obligations and any detriment arising from that conduct was either irrelevant or insufficient to make it inequitable to allow the seller to rely on the Statute of Frauds.

The Court disagreed with these submissions and stated:

“Parties to an agreement which contemplates payment of a purchase price in exchange for transfer of title on agreed terms could therefore be expected, in the process of closing such a transaction, to identify and resolve any title concerns; to prepare closing documents and respond to requirements of the other party as to those documents; to deal with and assist in settling the form of closing documentation; and to be involved in making closing, payment and title transfer arrangements. Those matters are not separate from or merely preparatory to the performance of obligations. They are integrally connected to what is required to close the transaction, which is the circumstance under which payment and title transfer will occur.

Overall, the various steps that were taken in the closing process were part of a package of efforts made by the respondent to fulfill the appellant’s requirements for completion of the transaction. Those efforts included the respondent directing its lawyer to draft and provide documents necessary to complete the transaction, to review documents the appellant proposed to execute to complete the transaction, and to specify and address closing requirements. After the appellant’s lawyer stopped communicating, the respondent through its lawyer continued to take steps to determine how the closing payment would be transmitted, and then to tender the documents and funds necessary to close.”

The Court concluded that the steps that both parties took were properly considered as part performance and a source of detriment.

Detrimental

The Court then turned to the issue of whether the detriment was irremediable.  The seller argued that the acts were not irremediable because the tendered payment was not accepted and any other factors could have been remedied merely by quantifying them and ordering them repaid.

The Court agreed that a party must act to its detriment in carrying out irremediably its own obligations (or some significant part of them) under the otherwise unenforceable contract. However, it held that a party has irremediably performed its obligations when it has acted without an independent basis or expectation that it will be compensated for doing so. In effect, irremediable refers to performance that has been rendered solely in the expectation that the other party will fulfil its end of the oral agreement. The performance must be irremediable; the detriment need not be irremediable. And this was exactly what happened. The purchaser performed its end of the bargain and that performance was irremediable; it had taken place.

De Minimis

The seller then argued that to satisfy the detrimental reliance aspect, the detriment must be more than nominal or insubstantial. The Court rejected this argument also. It held that the time, effort, and expense that the purchaser incurred up to the aborted closing constituted a real detriment, and that there is no dollar limit or financial threshold that determines real detriment.

Purpose

The Court noted that the purpose of the Statute of Frauds is to prevent a deceptive plaintiff persuading a court to unjustly deprive a defendant of property through a bogus claim, and the purpose of the doctrine of part performance is to prevent the Statute of Frauds being used to allow, rather than prevent, fraud.

The Court reasoned that acceding to the seller’s arguments would unduly narrow the doctrine of part performance and undercut its remedial purpose. After all, in this case, there was an indeed an oral agreement.

The Court therefore dismissed the appeal.

 

Image courtesy of wilhei.

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