Property, Parties, Price – How Far the Court Will Go to Insert the 3 P’s of Real Estate into a Contract
The Statute of Frauds and Canadian jurisprudence require that for any contract of real property to be enforceable, it must contain an agreement with respect to three essential elements knowns as the 3 P’s: parties, property and price. “Parties” refers to the entities that are intended to be bound by and perform the contract. “Property” refers to certainty as to what parcel of real property is intended to be sold. “Price” refers to a certain value or promises to be exchanged for the property.
In the recent appeal in Intergulf Investment Corporation v. 0954704 B.C. Ltd., 2018 BCCA 337 (CanLII), the court was left to grapple with how far a court ought to go in assisting purchasers in settling the 3 P’s where there had been significant errors in recording the agreements as to those terms.
Briefly, in Intergulf, the purchaser, Intergulf Investment Corporation (“IIC”) intended to purchase three properties from Dr. Kazemi and his numbered company, 0954704 B.C. Ltd. IIC made an offer to purchase the properties, but the offers all contained the name “Intergulf Development Corporation” rather than Intergulf Investment Corporation; as such, IIC was not correctly named as the purchaser.
IIC’s president corrected several of the misnomers prior to signing the offers but missed several instances as well. The offers, along with the incorrect naming of IIC, were passed along to Dr. Kazemi and 0954704 B.C. Ltd.
Dr. Kazemi and 0954704 B.C. Ltd. did not accept the offers but countered for a $100,000 increase in the purchase price and an alteration of completion dates. The counteroffers did not correct the misnomer concerning IIC and included typographical errors concerning the purchase prices. The typographical errors included the number of “$1,150,000” being stated as the purchase price for two of the properties with the words “One Million One Hundred Fifty” written next to it and the number for the third property being written as “$1,190,000” with the words “One Million One Hundred Thousand” next to it. In other words, there were differing purchase prices written: $1,150,000 compared to $1,000,150 on two of the properties and $1,190,000 and $1,100,000 for the other property.
Despite the accumulating errors, IIC’s president signed the counteroffers, which were then returned. IIC made an attempt to purchase a fourth property in place of one of the other three, but Dr. Kazemi declined this. Notably, in Dr. Kazemi’s counteroffer he stated that it would have been a term of the proposed fourth purchase for IIC to withdraw its accepted offer of one of the three properties.
Two of the purchase contracts were assigned to Lions Gate Village Project Ltd. (“LGVPL”) prior to closing.
IIC and LGVPL attempted to close and Dr. Kazemi and 0954704 B.C. Ltd. refused to do so; stating there was no valid and binding contract. The parties went to court when they could not reconcile their differences.
The trial judge elected to rectify the purchase contracts. Observing that the contracts suffered from sloppy drafting, it was clear that IIC was the intended purchaser; there was effort to correct IIC’s name and, even if it wasn’t corrected in all places, Dr. Kazemi was aware of the efforts to make the correction.
Similarly, the trial judge found that there was evidence of the intention to increase the purchase price by $100,000 for each property. This agreed with the numerical value inserted into the contracts even though the written-out versions of the purchase prices contained errors. The court noted that neither party corrected the discrepancy and it found that both parties had assumed the numerical prices were correct.
On review, the Court of Appeal found that the purchase contracts contained obvious inconsistencies between the numerical and word descriptions of the purchase price as well as in the naming of IIC. The Court went on to hold that the task of the judge in such a case is to determine the mutual intention of the parties (citing Hoban Construction Ltd. v. Alexander, 2012 BCCA 75 (CanLII)). The Court cited a passage where it was stated that “…every effort should be made by a Court to find a meaning, looking at substance and not mere form, and that difficulties in interpretation do not make a clause bad as not being capable of interpretation, so long as a definitive meaning can be property extracted.” (emphasis removed).
The Court of Appeal observed that rectification, the Court-ordered alteration or correction of a contract, is a discretionary remedy. The Court observed from Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56 (CanLII) that rectification requires proof that the parties have been in agreement and there has been an error in the recording of that agreement. The Court also noted the requirement that the parties demonstrate an intention up to the time of signature that indicates their agreement to the terms which were not properly recorded in the instrument that is ultimately signed.
The Court of Appeal found that oral evidence was properly accepted to assist in understanding the circumstances surrounding the making of the contracts. It went on to find that the rectification ordered at trial was not, in effect, making new contracts; rather, it was correcting mistakes made by the parties in recording their agreement. It also went on to find that there was no issue with the authority of the real estate agents to bind the parties they were retained by. In the end, the Court of Appeal determined to dismiss Dr. Kazemi and 0954704 B.C. Ltd.’s appeal; affirming the rights of IIC and LGVPL to enforce the purchase contracts.
Intergulf is a reminder of the continuing efforts by the courts to try to ensure that contracts are performed and interpreted the ways that parties intend and as part of a general move away from the strictest, most draconian interpretations of contracts. That said, it remains paramount for parties entering into a contract of purchase and sale for real property to remember the three P’s. It also remains prudent to seek legal advice when entering into any contractual relations, to records the terms of those relations and to ensure that there is no need to seek extrinsic and potentially conflicting evidence to understand the terms of a contract.
Jeremy Burgess is a litigation associate at Pushor Mitchell. If you have any questions about a legal dispute, especially as it relates to contractual disputes or the purchase or sale of real property, we’d be happy to assist you. Feel free to contact Jeremy in a confidential manner toll free at 1-800-558-1155 or at firstname.lastname@example.org. You may also contact our litigation group.
The foregoing is for informational purposes only and is not legal advice, nor should be construed as such.