Condition did not confer on vendors ‘sole, absolute and unfettered discretion’ to terminate

Real Property - Sale of land - Agreement of purchase and sale

Purchasers entered into standard form contracts with vendors to purchase condominium units. By regulation, contracts were required to incorporate provisions of addendum to agreement of purchase and sale, which permitted certain types of early termination conditions. Purchasers were notified by written correspondence that vendors were exercising their rights under early termination condition to cancel project on basis that, despite having taken all commercially reasonable steps, financing satisfactory to vendors could not be arranged. Purchasers maintained that “sole, absolute and unfettered discretion” proviso in satisfactory financing condition was inextricably part of condition, and was not permitted under terms of addendum. Purchasers brought application for declaration that early termination clause was null and void in its entirety such that vendors were left with no contractual financing out option as basis to terminate agreements. Application dismissed. Where statutory regulations dictated requirements for what must be in documents, those regulations must be construed strictly, and where there were two possible interpretations, one more favourable to consumer should govern. Proviso could not and should not be interpreted so as to confer on vendors “sole, absolute and unfettered discretion” to terminate agreement. Obligation to take all commercially reasonable steps within one's power to satisfy early termination condition could not be read harmoniously, and was in direct and unavoidable conflict, with right to rely on sole, absolute and unfettered discretion in respect of that same condition. At very least proviso raised ambiguity about vendors' obligation to take all commercially reasonable steps within their power to satisfy financing condition as opposed to having unfettered discretion, and doctrine of contra proferentem required that interpretation was adopted that was more favourable to consumer. Court preferred to give provisions of contract meaning that would make them lawful, rather than unlawful. Purchasers' interpretation resulted in commercial absurdity, placed vendors under obligations which were likely impossible to perform, and could result in placing purchasers in even worse position than they were in as result of termination of project. Interpreted properly, condition did not confer on vendors “sole, absolute and unfettered discretion” to terminate, and only allowed them to terminate if, having taken all commercially reasonable steps within their power, they were unable to arrange satisfactory financing. Condition was not null and void.

Reddy v. 1945086 Ontario Inc. (2019), 2019 CarswellOnt 6883, 2019 ONSC 2554, Penny J. (Ont. S.C.J. [Commercial List]).

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