Understanding the Contract – Essential Tips for a Smooth Real Estate 1
Real Estate Lawyer Mississauga & Toronto GTA

Blog Detail

Best Immigration Law Firms Near Me

Understanding The Contract:-

You have won the bidding war on the home of your dreams; you have secured financing; you are all set to close, and you have one assessment left. The assessment is scheduled for the date of closing, and at 3 P.M. on the day of closing, during your final walk-through of the property, you realize the stove does not work. What are your options?

When buying a property, any number of issues can arise. An appliance that was meant to be in “good working condition” does not function, the property zoning is not as promised, or the vendor refuses to complete the transaction on the set closing date. Understanding the Contract is essential here, as it will help determine if this breach in the Agreement of Purchase and Sale (the APS) entitles you to damages, an abatement (or reduction) in the purchase cost, or if the violation is severe enough to cancel the deal altogether.

There are many elements from contract law that come into play when considering a real estate transaction. We need to determine if the problem is a Condition, a Warranty, or a Representation because Understanding the Contract will help you decide what actions you can take going forward.

When buying a property, any number of issues can arise. An appliance that was meant to be in “good working condition” does not function, the property zoning is not as promised, or the vendor refuses to complete the transaction on the set closing date. You must now determine whether the breach of the contract, the Agreement of Purchase and Sale (the APS), entitles you to damages, an abatement (or reduction) in the purchase cost, or if the violation is severe enough to cause the deal to fall through.

There are many different elements from contract law that come into play when considering a real estate transaction. We need to determine if the problem is a Condition, a Warranty, or a Representation because what actions you can take going forward depend on this.

Warranty or Condition

Every Agreement of Purchase and Sale contains various terms, such as price, closing date, and what is included. When a term is breached, it’s important to determine whether it is a condition or a warranty. Part of this process involves Understanding the Contract and the intentions of the parties involved.

A warranty is a representation that the item being sold is as represented or promised. In general, a violation of warranty leads to damages or an abatement. A condition is a term so essential that the party benefiting from it would not have entered into the contract unless promised its strict performance. Failure to meet a condition may render the agreement invalid.

Thus, a non-functional stove would typically be considered a warranty, and to bring an action for a breach of warranty, the buyer would need to complete the purchase and claim damages for the vendor’s failure to fulfil this specific term.

Representations

Remedies may also be available if the vendor made a representation before or during the Agreement of Purchase and Sale. The representation must encourage the buyer to purchase the property, and it must be false and relied upon.

There are two main types of representations: Innocent and Fraudulent.

  • Fraudulent representations are false and made with the intent to deceive. If proven, fraudulent misrepresentation allows the buyer to cancel the contract and sue for damages, including any losses directly or indirectly related to the breach of the Agreement of Purchase and Sale.

  • Innocent representations may be made in good faith. If proven, the buyer can cancel the contract and recover their deposit but cannot claim damages. Sometimes, representations are made negligently, meaning the individual making the representation failed to take proper care in ensuring its accuracy.

For example, if a seller claims a deck was built with a permit, but it turns out the seller never checked and the statement was false, this would be a negligent misrepresentation.

Therefore, Understanding the Contract and your rights is essential. It is highly recommended to consult with a trusted real estate lawyer in Toronto, like Suma Law, to discuss the Agreement of Purchase and Sale. If the real estate transaction starts to go awry, Understanding the Contract will ensure you know your rights and potential damages. Speak to your lawyer early to protect your interests. Otherwise, an issue like a non-working stove could end up impacting the entire transaction.

To learn more about Understanding the Contract for the Agreement of Purchase and Sale or any other aspect of buying or selling property in Toronto, feel free to contact Suma Law at +1 905 461 9860!

Read More