SCC Confirms Concluded Contract Requires Unconditional Terms – and Broker Doesn’t Bag the Commission in Société en commandite Place Mullins v. Services immobiliers Diane Bisson inc.
June 26, 2015
By James Mosher, at McInnes Cooper
On June 25, 2015 the Supreme Court of Canada confirmed that for a contract to be “concluded”, it must be – or become – unconditional. And when a buyer responds with a further condition, the contract isn’t concluded and in this case, the broker couldn’t bag its commission. The question of whether a contract is “unconditional” and “concluded” is relevant beyond Quebec, though other aspects of the decision aren’t because they depend on the Quebec Civil Code (which only applies in Quebec).
The vendor signed a standard form brokerage contract with a broker to sell its real property stating the vendor’s obligation to pay the commission was triggered where an “agreement to sell the [real property]” was “concluded” during the term of the contract. The broker procured an offer to purchase the property that contained a condition giving the purchaser the right to terminate the agreement if he wasn’t completely satisfied with the results of his due diligence. The sellers accepted. The purchaser’s due diligence revealed the property was affected by environmental contamination requiring remediation. The purchaser agreed to complete the purchase – but on the condition the vendor decontaminate it. The vendor refused, the sale fell through and the vendor refused to pay the brokerage commission. The broker sued – and failed. The SCC analyzed the issue and provided its opinion even though the vendor ultimately conceded the contract wasn’t validly concluded:
Not Unconditional. An agreement of purchase and sale isn’t “concluded” until it is “unconditional” – and when the buyer introduced new conditions, this prevented the contract from becoming unconditional.
Not “Concluded”. Since the contract never became “unconditional”, it was never “concluded” and – adopting a former SCC Justice’s analogy likening a brokerage contract to a hunting licence because, “as in hunting, the broker may spend much time and effort but fail to achieve his goal” – the obligation to pay the commission under the brokerage contract was never triggered.
The decision offers a useful analysis of whether a contract is “unconditional” and “concluded” to real property vendors – and to hunting brokers. However, the fact that this dispute actually saw a courtroom is likely because the broker viewed the vendor’s refusal to foot the clean-up bill was unreasonable given the remediation cost was quite low compared to the purchase price, and the commission would have been significant.
Read the SCC’s decision in Société en commandite Place Mullins v. Services immobiliers Diane Bisson inc., 2015 SCC 36 here.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Real Estate Team to discuss this topic or any other legal issue.
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