The Law of Good Faith . . . or lack thereof

By: Jayson Schwarz LLM

The Supreme Court of Canada said that good faith is not a requirement by either side in the negotiation of a contract. They went on to say that once the contract is signed there is an obligation to perform in good faith. What does this mean to you? Here is a list:

1. The most important thing to remember is that if it is not in writing, in the Agreement of Purchase and Sale, it is not binding on either side.
2. It does not matter what the agent says or promises  – see 1 above.
3. It does not matter what is in the brochure or sales office – see 1 above.
4. EVERY Agreement should be reviewed before it is binding by a lawyer who knows real estate.
5. Only your lawyer has a legal, moral and ethical requirement to protect and put you first.
6. EVERY Agreement must be conditional on lawyers review and the condition in writing and keep it that simple. Some agreements have condition clauses that are mumbo jumbo that do not let you really change anything. Also make sure the time for review is there and sufficient.
7. Most agreements have clauses that require you to pay for many extra things on closing, they MUST be capped!!
8. Many agreements provide for size or dimension changes, make sure that your lawyer puts in the following, if necessary: “Notwithstanding anything herein contained, any variation of size or dimension. Of lands or dwelling, in excess of 5% of that represented on the date of execution hereof shall be proportionately abated on closing”.
9. Many agreements do not provide for mortgage discharge statements and directions on Closing, make sure your lawyer puts in the following if necessary: “save and except that the Vendor shall provide on Closing, mortgage discharge statements together with a direction from the Vendor to pay sufficient funds to said mortgagees to discharge said mortgages in accordance therewith”.
10. Some agreements have escape clauses that let the Builder terminate the agreement in his discretion and you end up with no house, have your lawyer check.

Ok the Agreement is signed, reviewed, amended and ready, now what? The Builder must thereafter act in good faith to complete the contract in accordance with the terms of the Agreement.

Remember, most builders and their sales people are honest, caring individuals who want to deliver a quality product.  Just be careful so any bad apples cannot succeed.