This column was originally published on RENX.ca.
In the realm of real estate transactions, it’s well understood that for a purchase and sale contract to be legitimate, it must, at the very least, outline the identity of involved parties, describe the property in question and set forth the purchase price.
There is also an implied mandatory requirement for such agreements to be in writing in order to be enforceable.
While this might seem straightforward, courts have recently been more accommodating toward accepting less traditional means as evidence of a written agreement. For instance, even emails and memoranda have gained legal recognition in this capacity.
Interestingly, a judgment in Saskatchewan in the case of South West Terminal Ltd. v Achter Land recognized a simple “thumbs up” emoji as a valid form of agreement acknowledgment.
However, complexities arise when essential terms of a real estate contract rely predominantly on oral affirmations. Notably, the law permits an exception under the “Statute of Frauds” when “part performance” of the contract can be proven.
Part performance in a land sale transaction
This exception was recently at the forefront in the Ontario case, 2730453 Ont. Inc. v. 2380673 Ont. Inc. Here, the court not only validated an unwritten land sale agreement based on part performance, but also went the extra mile by ordering the specific execution of the contract.
This was an unconventional move, especially considering the context of commercial real estate deals.
In that case, two parties embarked on a negotiation concerning a land sale. Despite the seller’s preference against signing any formal purchase and sale agreement, both parties progressively moved toward finalizing the transaction.
This purchaser ended up presenting both the closing documents and offering up the purchase price. However, the seller unexpectedly backed out, prompting the purchaser to sue for breach of contract.
The seller tried to lean on the Statute of Frauds, asserting that their verbal agreement with the purchaser was null due to the absence of a written contract. The purchaser, on the other hand, argued the agreement could not be nullified for that reason as there was ample written evidence of the deal and both sides had acted as if it was going ahead.
The court’s judgment favoured the purchaser. While the documents presented by the purchaser weren’t sufficiently detailed under the Statute of Frauds, the doctrine of part performance came to the rescue, indicating that a partially executed oral agreement is enforceable.
Meeting the standard of part performance
To satisfy the doctrine of part performance, two criteria must be met.
The action must be directly related to the property in contention and the action itself should suggest some transaction concerning the land. In this particular case, both sides displayed actions unequivocally connected to the disputed land, from environmental assessments to retaining lawyers to complete the transaction.
With these requirements met, the court then pondered the proper remedy. While the purchaser pushed for the sale to be completed, the seller asked for monetary damages to be awarded instead.
Three pivotal factors guided the court’s decision:
- the property’s uniqueness;
- the appropriateness of damages as a remedy;
- and the behaviour of both parties and noted that specific performance may be refused if the party seeking it has not behaved fairly in the context on the transaction.
In this case, it was noted the purchaser had not committed any misconduct. Therefore the court denied the seller’s request for damages and ordered the transaction be completed, as requested by the purchaser.
This case underlines the pivotal role of equity in upholding parties’ intentions. It suggests that even in the absence of a written agreement, the doctrine of part performance can substantiate the contract’s existence.
For real estate stakeholders, this signifies the importance of treading cautiously during pre-contractual negotiations and actions. The legal landscape may prioritize fairness over stringent formalities, potentially trapping those relying heavily on the latter.
When an emoji can be legally binding
That decision also came off the heels of the landmark ruling of South West Terminal Ltd. v Achter Land, where a Saskatchewan court ruled the humble 👍 emoji is legally binding enough to act as a signature.
This decision spotlights a shift in the Canadian legal sphere, echoing the evolving trends of emoji communications in our society.
Although that case did not involve a real estate deal, its implications could undoubtedly apply to the world of real estate as well.
In that case, two parties were in talks about a contract for the shipment of flax seed. Following their chat, the buyer sent the seller a snapshot of the contract via text message and asked him to “please confirm flax contract”. The seller replied with a straightforward “thumbs-up” emoji.
The shipment was never delivered and the seller took the position that because a signed contract was never entered into, there was no deal in the first place.
The buyer disagreed and sought a court order to enforce the agreement.
The seller argued that the parties never reached a deal and that the emoji was just an acknowledgment of receiving the contract, not an agreement to its terms. He stated that he was anticipating a formal contract through fax or email for review, which never came to pass.
The buyer, on the other hand, argued that his request for confirmation, followed by the seller’s emoji, constituted a binding agreement and therefore took the position the “thumbs-up” was as good as a written signature.
Decision of the court
The court took the buyer’s side and held that the emoji was sufficient to bind the parties to the contract.
However, it was not held that a “thumbs up”, in and of itself, is always as good as a signature. In this case, the judge delved into the historical relationship between the parties, who had entered into many deals in the past.
It was not the first time the buyer had sent the seller pictures of a contract and the seller would often send responses like “looks good” or “OK”. Keeping that in mind, the judge found the thumbs-up emoji was typically understood to express approval or encouragement, especially in Western cultures.
Given this interpretation, along with the history of casual contracts between the two, the court felt it was natural for the buyer to assume they had a deal.
These decisions should not be taken to mean contracts don’t need to be signed or emojis are now replacing signatures. But they do serve as a reminder that courts can (and will) do away with formalities and look to intentions.
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About the Author:
Daniel Waldman is Of Counsel in the firm’s Toronto office. He has a broad commercial litigation practice with an emphasis on real property litigation, including commercial leasing, commercial real estate, construction law, and debt collection. Daniel can be reached at 416-644-2838 or dwaldman@dickinsonwright.com. To read his full bio, please click here.