Assignment of a Contract of Purchase and Sale: Get it in Writing
While a contract can be formed by any combination of communications and oral and verbal agreements, it remains the most prudent course of action to reduce a contract to writing to avoid any ambiguities about what has or has not been agreed to. When it comes to contracts concerning the disposition of real property, there is a statutory requirement that the agreement concerning such a disposition be reduced to writing to be enforceable except in certain circumstances.
S. 59(3) of the Law and Equity Act, RSBC 1996, c 253 provides that:
(3) A contract respecting land or a disposition of land is not enforceable unless
(a) there is, in a writing signed by the party to be charged or by that party’s agent, both an indication that it has been made and a reasonable indication of the subject matter,
(b) the party to be charged has done an act, or acquiesced in an act of the party alleging the contract or disposition, that indicates that a contract or disposition not inconsistent with that alleged has been made, or
(c) the person alleging the contract or disposition has, in reasonable reliance on it, so changed the person’s position that an inequitable result, having regard to both parties’ interests, can be avoided only by enforcing the contract or disposition. (emphasis added).
Similarly, s. 36(1) of the Law and Equity Act provides as follows:
36(1) An absolute assignment, in writing signed by the assignor, not purporting to be by way of charge only, of a debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim the debt or chose in action, is and is deemed to have been effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this Act had not been enacted, to pass and transfer the legal right to the debt or chose in action from the date of the notice, and all legal and other remedies for the debt or chose in action, and the power to give a good discharge for the debt or chose in action, without the concurrence of the assignor. (emphasis added)
In the recent case of Guraya v Kaila, 2019 BCSC 101 (CanLII), the Plaintiff’s sought to enforce a verbal assignment of a contract of purchase and sale in the face of vendors refusing to complete with the assignee purchasers. Materially, the vendors had no notice that the contract in question has been assigned nor had they agreed to such an assignment despite the contract containing a provision that did allow for the assignment.
The vendors’ argument was that the plaintiffs had not complied with ss. 36(1) and 59(3) of the Law and Equity Act and, as such, the assignment of the purchase contract was not enforceable.
The case ultimately turned on whether the purported assignment could be enforceable against the vendors in light of the requirements of ss. 36(1) and 59(3). The court held that the purported assignments were required to comply with s. 59(3) as they concerned the disposition of land.
It was clear that s. 59(3)(a) did not apply as there was no written agreement for the sale of the land in question as between the would-be purchasers/assignees and the vendors. There was nothing put in evidence that even demonstrated the vendors were made aware of the purported assignment.
The court held that s. 59(3)(b) concerned whether the vendors had done any acts done in part performance of a contract, not the assignor as the plaintiffs urged. The court found that no such act had been performed and, in fact, the only act done by the vendors in relation to the assignment was to implicitly reject the assignment.
The defendants were uninvolved with any detrimental change of position on behalf of the assignees such that s. 59(3)(c) had application.
Ultimately, the court found that the vendors were not the authors of nor contributed to any hardship wrought on the assignees. As the vendors were not any part of the purported assignment, they were not bound by it. The vendors were not obliged to complete on closing documents with parties other than those they contracted with. In the absence of evidence that the original purchaser was ready, willing and able to complete, the vendors were entitled not to complete.
Guraya v Kaila underscores the importance of reducing any agreement concerning the disposition of land to writing, including the assignment of any interest in such an agreement. It is a far harder hill to climb to prove that a party is bound to an agreement concerning the disposition of land by circumstances than it is to procure a written contract in respect of such a disposition.