A Contract To Enter Into A Contract Is Unenforceable by primusboy


									A Contract To Enter Into A Contract Is Unenforceable
Real Estate, by its own very nature, is all black and white - you either
do things, or you don't.
There is no grey area in Real Estate, which one can find otherwise in
commerce and trade. For instance, letter of intents that are widely used
prior and during negotiations between corporations or between individuals
and corporations have no place whatsoever in the world of real estate,
where the only subject matter of trade is the exchange of titled
interests in land for money. One cannot stipulate today to contract out
in the future and hope the stipulation will be upheld, unless such an
agreement is contained in a contract drafted and accepted today and is in
the form of an option.
In essence, a stipulation to contract out at a later date is a void
contract, meaning that such a stipulation does not exist under the law of
real estate because no contract ever existed in the first place.
Therefore the parties to the stipulation must be returned to their
original bargaining positions as far as it is practically possible. This
is also the case in the situation where both parties want the stipulation
to continue - an impossibility since no contract exists between them in
the present tense.
This principle was recently reaffirmed in the Supreme Court of British
Columbia in a case involving a private transaction between a prospective
Purchaser and a prospective Seller. In this case there was a document
executed between the parties, which clearly set out the legal description
of the real property to be exchanged as well as the purchase price - CAD
580,000. The document also set out that there would be a deposit of
$10,000 held by the purchaser's lawyer in trust, that the deposit would
be applied towards the purchase price and that it would be returned to
the purchaser if the sale failed to complete.
Although on a cursory examination this document closely resembled a
Contract Of Purchase And Sale there was, however, a fundamental element
entirely missing: the date of completion. As no completion date had yet
been agreed upon, a paragraph was inserted in its lieu that read as
"The Contract of Purchase and Sale of the Property will be prepared by
the Purchaser's lawyers with terms & conditions, and the date of
completion of the Property to be agreed by the Vendor and the Purchaser".
Later on a completion date was actually agreed upon by the parties,
stipulated to be March 3, 2005. On February 24, the solicitor for the
Purchaser forwarded to the solicitor for the Vendor the necessary
documents to complete the transfer. However, on March 3, 2003, the
completion date set out in the document, the vendor declined to complete,
on the grounds that there was only an agreement to agree in the future to
the purchase and sale of the subject property.
The Court agreed with the Vendor. In reaching his conclusion, the Trial
Judge opined as follows:
"Here the wording of the executed document is clear. The parties have
said that a contract will be prepared with terms and conditions to be
agreed by the vendor and the purchaser. "To be agreed" means some further
agreement is necessary in the future. [...] this is a circumstance where
"the execution of the further contract is a condition or term of the
In other words, where the parties have stated that the terms and
conditions are to be agreed, it cannot be said that the document is the
mere expression of the desire of the parties as to the manner in which
the transaction already agreed to will in fact go through.
The deposit was ordered reimbursed to the Purchaser forthwith.
Luigi Frascati
Luigi Frascati is a Real Estate Agent based in Vancouver, British
Columbia. He holds a Bachelor Degree in Economics and maintains a weblog
entitled the Real Estate Chronicle where you can find the full collection
of his articles on Real Estate Economics and Finance. Luigi is associated
with the Sutton Group, the largest real estate organization in Canada,
and is based with Sutton-Centre Realty in Burnaby, BC.
Luigi is very proud to be an EzineArticles Platinum Expert Author. Your
rating at the footer of this Article is very much appreciated. Thank you.

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