Purchaser's obligations under contract of purchase and sale were distinct from obligation incurred by payer of deposit

Ontario civil | Real Property | Sale of land | Remedies

Plaintiff promoter B agreed to buy properties from defendant vendor in trust for company to be incorporated, without any personal liabilities, and paid deposit. Promoter did not incorporate company to adopt agreement, did not close tranaction, and brought action against vendor for return of deposit. Motion judge granted vendor's motion for summary judgment for order directing brokerage to release deposit to vendor. Judge held that promoter's failure to close transaction resulted in forfeiture of deposit unless contrary was expressly stated in agreement of purchase and sale. Judge held that deposit was not pre-incorporation contract subject to exclusion of personal liability under s. 21(4) of Business Corporations Act, and instead deposit was money to secure performance. Judge held that promoter who used express language in s. 21(4) of Act was not personally liable for damages, but promoter forfeited deposit to vendor if promoter failed to close. Promoter appealed. Appeal dismissed. Judge did not err in rejecting promoter's argument, that under s. 21(4) of Act, where contract provided that promoter was not bound by contract, neither can promoter be bound by deposit. Purchaser's obligations under contract of purchase and sale were distinct from obligation incurred by payer of deposit. Implied term of deposit was that on breach of contract by purchaser, or promoter on behalf of intended purchaser, deposit was forfeited to vendor. It was reasonable for judge to interpret phrase “without any personal liabilities” in context of contract as whole, and not applying to deposit.

Benedetto v. 2453912 Ontario Inc. (2019), 2019 CarswellOnt 2492, 2019 ONCA 149, C.W. Hourigan J.A., B.W. Miller J.A., and David M. Paciocco J.A. (Ont. C.A.); affirmed (2018), 2018 CarswellOnt 12045, 2018 ONSC 4524, Glustein J. (Ont. S.C.J.).


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