CANCELLATION OF A PROMISE TO PURCHASE FOR NOT RESPECTING DELAYS

Promises to purchase real estate usually include delays for the prospective purchaser to satisfy certain conditions such as inspection of the property or providing proof of financing amongst others. Can the vendor cancel the accepted promise to purchase if the prospective purchaser does not respect a delay? This issue was dealt with by the Quebec Court of Appeal in Azimut Promoteur Immobilier Inc. -vs- Raymond Gauthier et al. 2022 QCCA 1299. On November 26, 2019, the parties signed a promise to purchase an immovable property by no later than March 1, 2020 for the price of $1,225,000. The purchaser remitted a non-refundable deposit of $100,000 to be applied to the purchase price. On February 19, 2020 the parties signed a second agreement which provided inter alia that Purchaser would pay the additional sum of $100,000 as second non-refundable deposit by no later than March 31, 2020 and that the parties would consummate the sale no later than 30 days following the issuance of the certificate of authorization by the Minister of the Environment or at the option of the purchaser, the sale could be consummated prior to the issuance of the environmental certificate. The purchaser failed to pay the deposit that was due on March 31, 2020, which it claimed was due to inadvertence caused by the pandemic. Six months later in a letter dated September 15, 2020, the vendor informed the purchaser that it considered the accepted promise of purchase to be null and void as a result of the purchaser's default to remit the second deposit by March 31, 2020. The next day, purchaser remitted to vendor two cheques totaling $100,000 which the latter returned to the purchaser. After giving vendor prior notice to proceed with the sale, purchaser filed suit to order vendor to consummate the sale of the property failing which, the court would order the sale consummated without the vendor's consent. The vendor made a preliminary motion to dismiss the proceedings on the ground that the promise to purchase was null and void as a result of the purchaser's default to pay the deposit within the stipulated delay. The court in first instance granted the motion and dismissed the proceedings considering that the stipulated delay was mandatory and there was no allegation of bad faith on the part of the vendor nor any allegation that would question the strict character of the delay. In appeal, the decision of court of first instance was reversed on the basis of the legal principles hereinafter reviewed. In order to dismiss a case on a preliminary motion prior to a trial on the merits, the grounds for dismissal must be very clear and not leave any doubt. In the presence of any ambiguity, it is best not to dismiss a case prematurely but instead allow the parties the opportunity to be heard on the merits at a trial. For a delay to be considered strict and mandatory giving rise to the cancellation of the contract in the event of contravention, it must be clearly stated as such in the promise to purchase which was not so in the present case. In the face of ambiguity regarding the express terms of the promise to purchase, the court may look at the conduct of the parties to infer how they interpreted the strictness of the delay. In the present case which was decided on the basis of a preliminary motion there was nothing available to the court to provide it with insight in this regard. Moreover, the silence of the vendor during a period of almost 6 months following the expiry of the delay to pay the second deposit is arguably inconsistent with such delay being strict and mandatory. According to the Court of Appeal the case law was clear and consistent with respect to the foregoing. In the circumstances where there may be ambiguity regarding the strictness of a delay that is breached, the other party may give final written notice to the party in default to satisfy the condition within a certain additional delay failing which, the promise to purchase will be deemed to be cancelled and annulled for all legal purposes.