Courts will almost always uphold strict provisions for contractual deadlines, writes lawyer Bob Aaron. Buyers and sellers should be aware that there is no wiggle room when it comes to closing deadlines.
When a home purchase agreement has a “time of the essence” clause it means that any time deadlines in the contract will be strictly construed and there is no wiggle room for interpreting otherwise.
Sometimes, through no fault of their own, when buyers or sellers are not able to meet the rigid deadlines, courts may be asked to bend the rules and allow a party to escape the consequences of their actions. That’s what happened in a court decision released last summer.
In February 2020, Ivy and Alvin Correa signed an agreement with Valstar Homes to buy a pre-construction home on Post Rd. in Oakville for $1,440,000. The agreement set a closing for no later than 5 p.m. on January 27, 2021, unless extended by the builder or by agreement between the parties.
The builder later extended the closing date to April 20, 2021. On that day, the buyers ran into trouble securing the funds needed for closing. They asked for a one-day extension, but the builder refused the request. Ultimately, the Correas arranged private financing and were able to deposit the money into their lawyer’s bank account late on the day of closing.
Their lawyer wired those funds to Valstar’s lawyer at 4:52 p.m. but they did not arrive until 5:09 p.m. – nine minutes late.
The next day, Valstar took the position that the buyers had breached the “time of the essence clause” because their payment was late, and the agreement was terminated.
Later that day, Valstar offered to revive the agreement if the buyers paid an additional $113,000 including HST as a “revival fee”. Its lawyer justified the fee by explaining that the value of the house had increased by $600,000.
The Correas accepted the offer, paid the money, and the deal closed.
More than a year later the Correas applied to the Superior Court for the return of their $113,000.
They claimed that Valstar had acted in bad faith after receiving the purchase price only nine minutes late. They argued that the court should not strictly enforce the “time of the essence” clause, while Vlastar countered that it was within its rights to insist on a timely closing.
Last June, after a two-day hearing, Judge Marvin Kurz dismissed the Correas’ application for return of the money. He ruled that Valstar was entitled to take the position that it did and there was nothing wrong in Valstar relying on its legal rights under the agreement. He also noted that the buyers could not prove any economic duress which prevented them from paying the $113,000.
Ultimately the court followed the reasoning of many prior cases upholding contractual certainty. There were no extenuating circumstances beyond the control of the buyers, and it would be unfair to the seller not to enforce the strict terms of the contract.
In a follow-up ruling in September, the innocent buyers were ordered to pay the builder $30,000 in costs.
Courts will almost always uphold strict provisions for contractual deadlines. Buyers and sellers should be aware that there is no wiggle room when it comes to closing deadlines.