Getting Around the Bhasin Decision (Part 2) The Rationale
We did look at a circumstance where it was necessary to draft up a suitable clause to get around the decision in Bhasin v. Hrynew that there was a duty of “good faith contractual performance in all contracts”:
That was one example, and it was only an example.
So, the issue is what is the overall rationale? What will work next time with something which is a little different?
- Make the clause unique to the parties in this deal alone.
- Make sure that it’s not simply an “off the shelf” legal precedent clause, since that will have it appear like any other clause to be interpreted by the Courts.
- Deal with the issue of informed consent, make it clear that both parties have agreed.
- Mention the consequences, like “this is simply an option to purchase”.
- Make sure that the test will be subjective and not objective.
“John Smith, (1) the proposed Buyer, has not had an opportunity to inspect the property (1), and consequently, this Offer is conditional upon such examination by John Smith (1), as follows:
- This condition is to be assessed on a subjective basis rather than an objective basis, (5)
- This is a condition which may in fact reduce this agreement to an option to purchase, (4)
The property is to meet the personal standards of John Smith (1), and be satisfactory to him (1), in his discretion, such discretion to be determined subjectively (5) in respect to John Smith’s personal preferences. (1)
Unless the Buyer gives notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto not later than _____ p.m. on the 14th day of November, 2018, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction.
The Seller (3) agrees to co-operate in providing access to the property to John Smith (1) for the purpose of this inspection and examination. This condition is included for the benefit of the John Smith (1) and may be waived at his (1) sole option by notice in writing to the Seller as aforesaid within the time period stated herein.
The Seller acknowledges and agrees to this condition included specifically for the benefit John Smith since he has not inspected or examined the property.” (2) (3) (5)
You will basically need a custom clause each time. If you do that and you personalize it, then, that should work. If you resort to a standard, general clause, then any such clause runs the risk of interpretation within the Bhasin principle rather than as an exception.
Brian Madigan LL.B., Broker