The Legal Justification for Bad Paperwork
We looked at the issue of reviving old agreements:
If they are dead, then they are dead. That’s easy enough.
However, sometimes we are just simply working with “bad paperwork”.
Out of convenience or laziness, an agent might seek to reuse a prior Offer, change the dates and go again. Or they might, mistakenly think that there was still some substance to the old agreement.
There are two theories which will allow a Court to determine that the parties are contractually bound:
- Promissory Estoppel.
In this case, the Court simply looks at all the material, generally concludes “what a mess” and then goes on to interpret the implications and meaning of the documents.
If the Court concludes that the parties intended to enter into a contract, then it will be open for the Court to decide that there was indeed a contract. That contract was created using bad paperwork. The author will receive a “D-“ on the exam, which, of course, is a mere passing grade.
The consequence, is that the parties have an enforceable agreement between them. The Court will do its best to interpret the meaning, provided there is a reasonable degree of clarity in respect to its essential terms: parties, property, price, terms, conditions, and completion date.
With “novation”, the parties struck a new deal, they just didn’t realize that they had bad paperwork.
In this case, we again have bad paperwork. The agreement became “null and void” because one or more of the conditions were not satisfied, fulfilled or waived.
As we go forward, neither the vendor nor the purchaser take notice of the fact that they had bad paperwork. They missed or simply overlooked the apparent flaws in the contract. At a certain point, they continue to work towards a closing, exchanging documentation, permitting further inspections by insurance representatives, appraisers, surveyors etc. and relying upon the belief (although mistaken) that they have a valid and subsisting agreement.
Once the Court reaches a conclusion that there has been one party who relied upon the document to his detriment, then the other party will be precluded from denying its existence. This party will be estopped from denying the promise to complete the deal as laid out in the documentation. They had their chance, but too much time has gone by, and it would be unfair to the other side to “pull the plug on the deal” at this late date.
With “promissory estoppel”, the parties continued with the contract, they just didn’t realize that they had bad paperwork.
These two doctrines to keep alive the deal may require litigation which can be expensive and would easily have been avoided with “good paperwork” on behalf of the parties. This is likely professional negligence on the part of the participating agents. At the very least, there would be liability for all the “added costs”.
Brian Madigan LL.B., Broker