Builders usually draft their own one-sided agreements. Does it help them? Often. However, sometimes an angry purchaser makes a point. One such point was made in Logger v. Bear Inc. [2007] O.J. 2007 (S.C.J.).
Tomorrow
A purchaser entered into an agreement with a builder for the purchase of a new unit in a condominium. The scheduled closing date was May 1, 2003, but the agreement had a clause that allowed the builder to postpone closing for up to 18 months. Two postponements later, the extended closing date was to be August 1, 2003. On June 7, 2003, the purchaser chose and paid for her upgrades. The unit was not ready on August 1, 2003. The builder extended the closing date four more times to a proposed date of October 31, 2004, one day before the 18-month deadline.
On October 31, 2004, the purchaser showed up with a loaded moving truck, but the builder told her that the unit was not ready. The builder and the purchaser agreed that the purchaser could store some chattels in the unit and that the builder would pay for the purchaser to live in a hotel. The new closing date was agreed to be January 24, 2005.
On January 24, 2005, the unit was still not ready for occupancy and the purchaser finally had had enough. She wanted her money back: $8,000 for the deposit and $7,300 for the upgrades. The builder was willing to comply. However, it wanted to set off the hotel charges it had paid against her deposit and was unwilling to refund the upgrade charges. The builder relied on a clause in the agreement that prevented the purchaser from recovering her upgrade costs if the agreement was not completed.
Gotcha
The judge noted that the 18-month extension period was long gone, but that the purchaser and the builder had agreed to the new January 24, 2005 closing date, with time still of the essence. The judge held that there was no agreement by which the purchaser gave “an infinitum gratuity to the vendor to complete its project and provide consideration under the Agreement.” The judge therefore held that there was no reason why the builder should have a right of setoff for its own default.
The judge also refused to allow the builder to rely on its confiscation clause for upgrade costs. He applied both tests in Hunter Engineering v. Syncrude Canada [1989] 1 S.C.R. 426 dealing with exculpatory clauses (the majority had set out two differing, but similar, tests). He first held that there was a complete failure of consideration. If that was not sufficient, he held that the builder’s use of the clause was unconscionable.
He stated, “I find it would be unconscionable in the circumstances of this case for the defendant to retain Unit 307 with cabinets and appliances paid for by the plaintiff with the Unit never occupied by her. It would be unfair to the extreme. … The defendant was in effect, holding the plaintiff hostage in that she had given up her lease of her prior home, was in very temporary and unsatisfactory accommodations provided to her by the defendant. There was a situation of decidedly weak bargaining position of the plaintiff vis à vis the defendant, the latter having full knowledge of the futility or wishfulness of its proposed successive closing dates and accordingly having awareness of its risk of default. The plaintiff’s trust in the defendant was abused.“
In the result, the judge ordered the builder to return to the purchaser all monies that she had paid to the builder. He also ordered the builder to pay $9,013.37 in costs; it seems that the purchaser beat her offer to settle.