When a Buyer Fails to Complete in a Falling Market

The Dispute

A homeowner agreed to sell her house to a buyer who was putting together neighbouring lots for redevelopment. He removed every condition, paid his deposit, and she then bought another home on the strength of the sale. Two weeks before closing he asked her to cut the price and push the date back four months, and when she refused, the money never arrived on the completion date. She was left carrying two properties on expensive private financing, and her house eventually sold six months later for roughly forty percent below the price he had agreed to pay.

The Parties’ Positions

The vendor commenced a breach of contract action and applied for judgment on a summary trial under Rule 9-7 of the Supreme Court Civil Rules. She contended that the purchaser repudiated the contract by failing to pay on the completion date, when she stood ready, willing and able to convey. She sought the shortfall between the contract price and the price the property realized on resale, and she claimed the interest and brokerage fees on the private financing that completed her own purchase. Her damages claim rested on the authorities holding that a vendor who markets the property reasonably from the date of breach may recover the difference between the contract price and the highest price obtainable within a reasonable time after the completion date.

The purchaser resisted summary determination on several grounds, among them the amount in issue and the affidavit evidence tendered on information and belief. He contended that the vendor had herself breached the contract by delaying access for the appraisal. He relied on the clause by which the seller agreed to allow reasonable access to the property for purposes of bank appraisal and all other purposes necessary or relevant to the buyer in order to effect a successful completion. On that footing he submitted that reasonable access meant access within a day or two of the request, and that expert evidence was needed to fix the standard. He further contended that the vendor failed to mitigate her loss by taking six months to sell.

The Court’s Decision

The court held the matter suitable for summary determination and found the access the vendor provided reasonable in all the circumstances. No one, the court observed, had told her the purchaser could not obtain financing without earlier access. It held further that even if she had breached the access clause, the purchaser had affirmed the contract, relying on his affidavit statement that he had always intended to complete. On mitigation the court was satisfied the vendor had taken all reasonable steps, and it measured damages at the resale price rather than at the date of breach. Counsel had produced no authority assessing damages six months after the completion date. Judgment went against the purchaser for damages in the high six figures, most of it the shortfall between the contract price and the resale price, which left him bearing the whole of the market’s decline on a purchase he never completed.

Key Lessons for Property Purchasers and Vendors

• Do not remove a financing condition before the funds are committed. The purchaser, who was assembling adjacent lots for redevelopment, removed the condition six months before completion, and the court treated that removal as an indication that financing was not in issue for him.
• Record any urgency attached to a request for access in the correspondence itself. The court preferred the contemporaneous email record to later affidavit assertions that access had been pressed repeatedly, and found nothing in those emails conveying urgency about the appraisal timing.
• Do not assume that a statement of continuing intention to complete is neutral. A purchaser who affirms the contract after an alleged breach by the vendor may lose the ability to rely on that breach, and here his own affidavit supplied that evidence.
• Treat the eventual resale price as the measure of exposure in a falling market. Where a vendor markets the property reasonably from the date of breach, a court may assess damages at the resale price rather than at the completion date, so exposure can grow after the sale collapses.

This matter turned on the wording of the contract of purchase and sale and on the evidence before the court at a summary trial. A similar dispute may resolve differently.

ATAC LAW acts for purchasers, vendors and developers in disputes arising from contracts of purchase and sale of real property in British Columbia.

Mike C. Stewart acted for the purchaser at the summary trial, having been retained shortly before the hearing.