Agreement of Purchase and Sale: Put it in writing.

By Noah Potechin (Of Counsel) of Merovitz Potechin LLP on Monday February 8, 2021.

You have decided to purchase or sell your home. The next step is to enter into an agreement of purchase and sale. It is important that the agreement be set out in writing, as per the Statue of Frauds. The Ontario Real Estate Association (OREA) provides the standards form upon which most residential transactions are completed in Ontario.

The OREA Form

In this example taken from the standard Freehold resale form 100, the OREA standards form states (emphasis added):

26. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the purposes of this Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number required by the context.

Therefore, if something in relation to the agreement of purchase and sale has been represented, and it is not set out in writing, then you may not rely on that representation.

Why is this important?

To have certainty of contact, and certainty of what was agreed upon by all parties, having the provisions of an agreement in writing is essential.  People have convenient memories.  If something is verbally promised and later forgotten the parties would have a dispute about the true nature of the agreement.  When we are dealing with hundreds of thousands of dollars, it is important to note exactly what was agreed upon.  These laws and provisions in the contract are there for the benefit of all parties.

For example, a buyer cannot say, “I know I agreed I would pay you $500,000, but don’t you remember last week you agreed on the phone to reduce it to $200,000?“. Conversely, a seller cannot say, “I know I accepted your offer to pay $500,000, but someone else came along and offered more. So, I called and asked if you would match it, and you agreed to pay $600,000.  Don’t you remember?“.

The law says that those conversations are of no force and effect unless the promises are set out in writing and signed.  It is important to know that everyone is on the same page when it comes to the terms in an agreement.

Put your expectations in writing.

When you enter into an agreement of purchase and sale for land, you should always be as clear as possible about your expectations.  If someone wants to change the terms, that is done only by amendment in writing and signed.  If you want to amend an agreement, make sure that amendment is captured in writing.  It may seem like a bizarre statement, but you might be very surprised to learn of the many verbal agreements that I have discovered in discussions with my various clients.  Many people are not aware that these changes must be made in writing.  

The only time a verbal arrangement should be made is if you do not care enough about the validity of the promise to make it worth setting out in writing.  This is a business decision though, not a legal one.  If you determine that it is acceptable that the deal could be completed without that promise being fulfilled, that is business.  As an example, if the seller promises you that she will leave the kitchen stools that go with the kitchen island for you, even though not listed in the chattels included section of the agreement, that is fine.  If you do not care whether she leaves them, then it is not necessary to set that out in writing.  However, if this is extremely important to you, it is essential that an amendment be signed.

Good Faith

There is also an element of good faith that must be adhered to as the courts have states many times, that contracting parties must fulfill their obligations under a contract in good faith.  If the agreement requires you to do something, you cannot simply not fulfill that obligation because you want to invalidate the contract.  That could be considered bad faith, and judges do not like to have parties before them who have acted in bad faith. 

How we can help

All agreements of purchase and sale must include those terms and conditions that you expect to be fulfilled in writing.  Promises made and not included in the agreement should not be expected to be fulfilled.  If you have any questions about the Agreement of Purchase and Sale, contact the real estate lawyers at Merovitz Potechin LLP, to review and discuss what is included and what is not.