Subject to Financing Conditions

Subject to Financing Conditions

The BC Court of Appeal upheld the trial judge in Gordon Nelson Inc v Cameron 2018 BCCA 304 when it refused to imply a term in a real estate contract that the purchaser use “best efforts” to find suitable financing to remove the condition for its benefit to complete the purchase of a certain real estate contract.

The Court of Appeal agreed with the trial judge that the contract require only an “honest effort” to find suitable financing, an obligation, she concluded that the purchaser had satisfied when it refused to complete the transaction.

The vendor had refused to return the deposit and the court ordered that it be returned to the purchaser.

The court agreed with the purchaser that by seeking to have a best efforts term implied in relation to the financing condition, the vendors were seeking to have the court rewrite the contract in a manner that is contrary to the express terms in the addendum.

The subject to financing term in question was:

“Subject to purchaser being able to arrange satisfactory financing on or before Friday, May 31, 1985 at 6 PM. The subject is for the benefit of the purchaser, and shall be removed in writing on or before 6 PM, May 31, otherwise this offer is null and void”

The appeal court stated that it is not the function of the courts to set interim agreements aside for uncertainty because they contain a clause that is not precisely expressed. If such a clause has an ascertainable meaning, then the court should strive to find it. As long as an agreement is not being constructed by the court, to the surprise of the parties, authorities to one of them, the court should try to retain and give effect to the agreement of the parties have created themselves.

The court referred to MJB Enterprises LTD v people’s food market LTD ( 1979) BCCA 11 BCLR 130, which said the following about the word satisfactory financing:

“Such a meeting could of been expressed as financing satisfactory to him, that is to the purchaser, and that means turns the interim agreement into an option. There is no mutuality of intention to support that construction.

In the result, the judge concluded that the case law did not support a general proposition that regardless of the express terms of the contract, a best efforts term must always be implied in relation to subject conditions. The appeal court agreed with the trial judge that the respondent was under only an obligation to use “honest efforts” to arrange satisfactory financing, which is a different matter from best efforts.

The court stated that the most that can be said as a general proposition is that the principle of good faith imposes a general duty of honest performance and all contracts, and whether it implies anything further depends on the language in context of the contract itself—Bhasin v Htynew 2014 SCC 71 at paragraphs 89 and 93.

The appeal court agreed that the judge was correct to treat the contractual obligation as defined by the express language of the contract. It was not a case about implying a contractual term in the absence of a term being expressly stipulated in the contract. To imply a term in these circumstances would be impermissibly to construct an agreement for the parties, contrary to the agreement. The objectively made.

The trial judge was correct to conclude that in any event, implying a term was not necessary to give the contract business efficacy. Making an honest effort to find suitable financing and honestly, concluding having tested the market, that suitable financing was not available is an efficacious business arrangement.

The judge found the purchaser honestly concluded that the market would not provide suitable financing further searching for financing would be pointless.

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