Simon looking earnest in Preveza, Greece

Online Lawyer (Ontario)

Legal Guides
tenant / small claims / welfare (ontario works) / odsp / human rights / employment / consumer /
collection agencies / criminal injuries compensation / sppa (admin law) / animal cruelty / dogs & cats / wild animal law (all Canada)

home / about / Simon's Favorite Charity / testimonials / Conditions of Use

Death and Other Projects

... what's this?
------------- . Deposits
In Aylward v. Rebuild Response Group Inc. (Ont CA, 2020) the Court of Appeal ...
[4] The law relating to deposits was set out generally by this court in Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, 137 O.R. (3d) 374, which the trial judge cited at para. 70 of the decision. At para. 20 of Redstone, this court quoted with approval Tang v. Zhang, 2013 BCCA 52, 359 D.L.R. (4th) 104, where Newbury J.A. noted, at para. 30, that:

A true deposit is an ancient invention of the law designed to motivate contracting parties to carry through with their bargains. Consistent with its purpose, a deposit is generally forfeited by a buyer who repudiates the contract, and this is not dependent on proof of damages by the other party. If the contract is performed, the deposit is applied to the purchase price [.]

---------------- frustration

. Perkins v. Sheikhtavi
In Perkins v. Sheikhtavi (Ont CA, 2019) the Court of Appeal commented as follows on frustration of contract, here in a real estate context:
[15] Frustration applies to contracts including real estate transactions, when a supervening event alters the nature of the appellant’s obligation to contract with the respondent to such an extent that to compel performance despite the new and changed circumstances would be to order the appellant to do something radically different from what the parties agree to under their contract: Naylor, at para. 55.

[16] A contract is not frustrated if the supervening event was contemplated by the parties at the time of contracting and was provided for or deliberately chosen not to be provided for in the contract: Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 1975 CanLII 726 (ON CA), 9 O.R. (2d) 617 (C.A.), at p. 626.

[17] A party claiming that a contract has been frustrated has the onus of proving the constituent elements necessary to establish frustration: Bang v. Sebastian, 2018 ONSC 6226 (CanLII), at para. 30; Gerstel v. Kelman, 2015 ONSC 978 (CanLII), 40 B.L.R. (5th) 314.

---------------- anticipatory repudiation

. Barresi v. Jones Lang Lasalle Real Estate Services Inc.
In Barresi v. Jones Lang Lasalle Real Estate Services Inc. (Ont CA, 2019) the Court of Appeal had this to say on anticipatory contractual repudiation:
[5] The trial judge correctly noted that contractual repudiation occurs “by words or conduct evincing an intention not to be bound by the contract”: Guarantee Co. of North America v. Gordon Capital, 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423, at para. 40. A contractual breach “is a repudiation of the contract if it is a breach of a contractual condition or of some other sufficiently important term of the contract so that there is a substantial failure of performance”: Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 (CanLII), [2015] 1 S.C.R. 500, at para. 145.

---------------- deposits

. Azzarello v. Shawqi

In Azzarello v. Shawqi (Ont CA, 2019) the Court of Appeal commented as follows on the law of deposits:
[44] Where the vendor breaches the agreement, the deposit is returned to the purchaser. If the purchaser has suffered damages as a result of the vendor’s default, the purchaser may also sue to recover those damages or in an appropriate case, may sue for specific performance of the agreement.

[45] It is well-established by case law that when a purchaser repudiates the agreement and fails to close the transaction, the deposit is forfeited, without proof of any damage suffered by the vendor: see Tang v. Zhang, 2013 BCCA 52 (CanLII), 359 D.L.R. (4th) 104, at para. 30, approved by this court in Redstone Enterprises Ltd., v. Simple Technology Inc., 2017 ONCA 282 (CanLII), 137 O.R. (3d) 374. Where the vendor suffers no loss, the vendor may nevertheless retain the deposit, subject to relief from forfeiture.

[46] This court recently restated the law regarding why a deposit is forfeited in Benedetto v. 2453912 Ontario Inc., 2019 ONCA 149 (CanLII), 86 B.L.R. (5th) 1, at paras. 5-7:
Where a payer (usually the purchaser) gives a vendor a deposit to secure the performance of a contract for purchase and sale of real estate, the deposit is forfeit if the purchaser refuses to close the transaction, unless the parties bargained to the contrary: see Howe v. Smith (1884), 27 Ch. D. 89 (C.A.); March Bothers & Wells v. Banton (1911), 1911 CanLII 74 (SCC), 45 S.C.R. 338. In Howe v. Smith, Fry L.J. stated at p. 101:
Money paid as a deposit must, I conceive, be paid on some terms implied or expressed. In this case no terms are expressed and we must therefore inquire what terms are to be implied. The terms most naturally to be implied appear to me in the case of money paid on the signing of a contract to be that in the event of the contract being performed it shall be brought into account, but if the contract is not performed by the payer it shall remain the property of the payee. It is not merely a part payment, but is then also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract.
The deposit stands as security for the purchaser’s performance of the contract. The prospect of its forfeiture provides an incentive for the purchaser to complete the purchase. Should the purchaser not complete, the forfeiture of the deposit compensates the vendor for lost opportunity in having taken the property off the market in the interim, as well as the loss in bargaining power resulting from the vendor having revealed to the market the price at which the vendor had been willing to sell: H.W. Liebig Co. v. Leading Investments Ltd., 1986 CanLII 45 (SCC), [1986] 1 S.C.R. 70, at pp. 86-87.

The motion judge provided a helpful summary of the law: a deposit is not part of the contract of purchase and sale, but “stands on its own as an ‘ancient invention of the law designed to motivate contracting parties to carry through with their bargains’, ‘something which binds the contract and guarantees its performance’, and is an ‘earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract’”: see Tang v. Zhang, 2013 BCCA 52 (CanLII), 41 B.C.L.R. (5th) 69; Comonsents Inc. v. Hetherington Welch Design Ltd., 2006 CanLII 33779 (Ont. S.C.); Howe v. Smith.
[47] However, forfeiture is always subject to the equitable remedy of relief from forfeiture. Section 98 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that: “[a] court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.” In Stockloser v. Johnson, [1954] 1 Q.B. 476 (C.A.), the English Court of Appeal set out the two pronged test that has been followed in Ontario for applying the relief from forfeiture provision: 1) whether the forfeited deposit was out of all proportion to the damages suffered; and 2) whether it would be unconscionable for the seller to retain the deposit: Redstone at para. 15.

[48] Up to this point, I have discussed what happens to the deposit when the agreement is completed, when the vendor defaults and when the purchaser defaults but the vendor suffers no damage. The issue in this case arose when the vendor did suffer a loss because of the purchaser’s breach; in that case, is the deposit treated as part payment and credited toward the damages, or is it retained in addition to the damages, subject to relief from forfeiture?

[49] In Dobson v. Winton & Robbins Ltd., 1959 CanLII 19 (SCC), [1959] S.C.R. 775, where the purchaser defaulted and the vendor eventually resold the land for $5000 less than the agreed price, the Supreme Court stated at para. 14, without discussion:
[t]he measure of damages in this case is the difference between the price provided for in the first contract, $75,000, and the price provided for in the second contract, $70,000. Counsel for the appellant admits that against the difference of $5,000 must be credited the deposit of $4,000; (Mayne on Damages, 11th ed., p. 234; 29 Hals., 2nd ed., p. 378).
The same proposition is stated in Victor Di Castri, The Law of Vendor and Purchaser, 3rd ed. (Toronto: Thomson Reuters, 2016), vol. 2 at p. 17-25, in discussing when a deposit is recoverable by a defaulting purchaser: “[w]here the land is sold at a loss, [the vendor] is entitled to recover that loss, less the amount of the deposit.”

[50] The issue of the treatment of the deposit where the vendor suffers a loss arose squarely in the recent summary judgment decision, Bang v. Sebastian, 2018 ONSC 6226 (CanLII), aff’d 2019 ONCA 501.[1] There, two deposits were paid totaling $35,000, on substantially identical language as in the agreement of purchase and sale in this case. Counsel for the vendor submitted that the deposit should be forfeited without crediting it to the damages for the loss, on the basis of the case law referred to above that says that the deposit is not just part payment but is held as security and is forfeited on breach of the agreement.

[51] The judge in that case rejected the vendor’s argument. He pointed out that the vendor could point to no case where the deposit was forfeited without crediting it toward the damages, although there were a number of cases where the opposite had occurred: Goldstein; Blonski v. Jarmakowicz and Kowalski, 1957 CanLII 426 (ON SC), 9 D.L.R. (2d) 66 (Ont. Supreme Court, High Court of Justice); and Dobson.

[52] He found that the result was dictated by the wording of the agreement of purchase and sale, at paras. 69 and 71:
Real estate transactions routinely involve the payment of deposits. The proper application of the deposit in circumstances where the purchaser fails to complete the transaction is governed by the parties’ agreement. Here, the wording of the Agreement of Purchase and Sale states expressly that the deposit is to be “credited towards the purchase price” on completion of the transaction.


I find that the wording of the deposit term in the Agreement of Purchase and Sale clearly and unambiguously reflects the parties’ intention that the deposit would be applied as a credit to the payment obligation owed by the purchaser defendant to the vendor plaintiffs on completion of the transaction. There is no difference to the use of the deposit in the event of termination of the agreement as opposed to its successful completion. Rather, it was intended to be applied as a credit to the obligation owed by the purchaser to the vendors: whatever form that obligation might take. I conclude that the $35,000 paid by the purchaser defendant is to be paid to the vendor plaintiffs and credited against the damages that they have proven
[53] I agree with this analysis. While the agreement only specifically calls for the deposit to be credited to the purchase price on completion of the agreement, the measure of damages is based on the difference between the purchase price and the lesser amount that the property sold for after the purchaser’s default. In other words, it is based on the vendor receiving the purchase price that was bargained for. One can infer that the intent of the parties was that the deposit be applied to the purchase price whether received on completion or as damages.

[54] I also agree that the cases discussed above, including Benedetto, where the deposit is forfeited because it is not just part payment but also a security mechanism to incentivize the purchaser to complete the transaction, explain why the deposit is forfeited when the vendor suffers no loss. The respondents point to one sentence in the Benedetto decision where the court states that “a forfeited deposit does not constitute damages for breach of contract but stands as security for the performance of the contract”: at para. 14. That statement is part of the explanation for the forfeiture of the deposit where there is no loss. However, where there is a loss, the deposit is treated as part payment for the damages suffered as a result of the loss.


In <>Shafron v. KRG Insurance Brokers (Western) Inc. (SCC, 2009) the Supreme Court of Canada set out the parameters for an acceptable non-competition agreement: [para 15-28]


. Solea International BVBA v. Bassett & Walker International Inc.

In Solea International BVBA v. Bassett & Walker International Inc. (Ont CA, 2019) the Court of Appeal dealt with an unusual case involving Ontario's International Sales Conventions Act, S.O. 2017. It made no particularly interesting points of law but is an example of this rarely litigated law.


. Himidan v Farquarson

In Himidan v. Farquharson (Ont CA, 2019) the Court of Appeal articulated basics of contract interpretation:
[20] A contract must be interpreted in accordance with sound commercial principles and good business sense: Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205 (CanLII), 85 O.R. (3d) 254, at paras. 24, 50. On the appellant’s argument, she was agreeing to sell only a seven-foot strip of the driveway. If the appellant’s contentions against the neighbours are correct, namely that the appellant owned the other two-foot strip by adverse possession, then the APS was reserving that two-foot strip to her (because she was not including it in the sale). If the neighbours’ assertion is right, then the appellant was selling a seven-foot strip of a nine-foot-wide driveway under circumstances in which the neighbours could block the other two feet, interfering with the functioning of the driveway as it appeared at the time of the APS. In either event, the appellant’s proposed interpretation does not make commercial sense.


In Reaction Distributing Inc. v. Algonquin Highlands (Township) (Ont CA, 2019) the Court of Appeal ...
contract / tender contracts
[6] ... On the first issue, the law is that substantial compliance is the test to be applied in considering tender requirements: Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3 (CanLII), [2007] 1 S.C.R. 116. Consequently, and subject to the second issue, it was open to the trial judge to find that the respondent substantially complied with the tender requirements and thus the appellant’s failure to consider the respondent’s bid constituted a breach of contract.

In Meridian Credit Union Ltd. v. Chijindu (Ont CA, 2019) the Court of Appeal
contract / waiver
[3] Accepting monthly payments did not amount to waiver under the terms of the mortgage, which provides that the mortgagee may waive default in writing, nor did accepting payments meet the legal test for waiver, laid down in Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490, which requires inter alia the communication of an unequivocal and conscious intention to abandon the right to rely on the deficiency or default. The motion judge found that acceptance of three payments did not satisfy that test and her conclusion is amply supported by the record.

In Brown v. Hanley (Ont CA, 2019) the Court of Appeal
unconscionability / application the union contitution (as a contract) 27-32

In Swampillai v. Royal & Sun Alliance Insurance Company of Canada (Ont CA, 2019) the Court of Appeal
contracts / unconscionability
[6] At para. 38 of Titus, this court endorsed four elements necessary for unconscionability:

1. a grossly unfair and improvident transaction;

2. the victim's lack of independent legal advice or other suitable advice;

3. an overwhelming imbalance in bargaining power caused by the victim's ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and

4. the other party knowingly taking advantage of this vulnerability.

In ACT Greenwood Ltd. v. Desjardins-McLeod (Ont CA, 2019) the Court of Appeal
contract / frustration 17

In Benedetto v. 2453912 Ontario Inc. (Ont CA, 2019) the Court of Appeal
paras 1, 5-18

Related case:
Cassandro v. Glass (Ont CA,
2019) the Court of Appeal [see para 57 re deposit ONLY; balance of case re distress is done]

Contracts - Interpretation
Goodlife Fitness Centres Inc. v. Rock Developments Inc. (Ont CA, 2019)

Contract - Unconscionability
Heller v. Uber Technologies Inc. (Ont CA, 2019)

Contracts - Duty of Good Faith

Contracts - Duty of Honesty

Contracts - Waiver

Contracts - Damages - Remoteness

Contracts - Duty of Good Faith

Contracts - Duty of Honesty

Contracts - Commercial - Interpretation

Contracts - Business - Interpretation

Contracts - Commercial - Interpretation

Contracts - Tenders

Contracts - Interpretation

Contracts - Interpretation

Contracts - Interpretation

Contracts - Interpretation

Contracts - Formation

Contracts - Agreements to Agree

Contract - Defences - Non Est Factum

Contracts - Piercing the Corporate Veil

Contract - Liability - One Party's Covenant to Insure

Contract - Privity

Contracts - Repudiation

Contracts - Anticipatory Breach

Contracts - Interpretation - Business Efficacy - Implying Terms

Contracts - Substantive Law - Jurisdiction

Contracts - Entire Agreement Clause

Contracts - Interpretation - Post-Commencement Behaviour

Contracts - Illegality - Severance

Contracts - Interjurisdictional - Where Made

Contracts - Interpretation - Entire Agreement Clause

Contracts - Venue - Jurisdiction Simpliciter

Contracts - Venue - Joinder

Contracts - Relief from Forfeiture

Contracts - Rectification

Contracts - Mistake - Mutual

Contracts - Interpretation - Insurance

Contracts - Interpretation - Subsequent Conduct

Contracts - Forum Selection Clauses

Contracts - When Litigation Precluded by Arbitration Clause

Contracts - Entire Agreement Clauses

Contracts - Entire Agreement Clauses

Civil Procedure - Pleadings - Limitations Must be Pled

Contracts - Interpretation - Liability Exclusion Clause

Contracts - Penalty Clauses

Contracts - Relief from Forfeiture

Contracts - Oral - Interpretation

Contracts - Repudiatory Breach

Contracts - Interpretation

Contracts - Interpretation

Contracts - Restraint of Trade

Contracts - Option - Uncertainty as to Terms

Contracts - Options - Unilateral v Bilateral Contracts

Contracts - Interpretation - Entire Agreement Clause

Contracts - Entire Agreement Clauses

Contracts - Waiver of Statutory Terms

Contracts - Rescission

Contract - Gift v Loan

Contracts - Forum Selection Clauses

Contracts - Release - Interpretation

Contract - Deposits - Forfeiture

Contract - Unconscionability

Contracts - 'Sham' Contract

Contracts - Duress

Contracts - Formation

Contracts - Interpretation

Contracts - Interpretation

Contracts - Duty of Good Faith
Contracts - Duty of Honest Performance
CM Callow Inc. v. Zollinger


---------------------- Contracts / civil waiver

[6] At para. 35 of his reasons, the application judge correctly set out the law of civil waiver, as summarized by this

court in Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597 (CanLII), 354 D.L.R. (4th) 516.

------------------------ Contract / Debt / demand prior to suing on a debt (here a guarantee)

[14] The jurisprudence since R.E. Lister Limited v. Dunlop Canada, 1982 CanLII 19 (SCC), [1982] 1 S.C.R. 726,

confirms that a debtor is entitled to a reasonable time to pay. That determination is fact-specific and dependent upon the

conduct of the parties, before and after the demand. It would not be possible, or indeed workable, for the creditor to

arbitrarily establish that timeframe for the debtor.

------------------------- Contracts / Debt / equitable discharge of a debt

Issue #2 Did the motion judge err in finding that there were no grounds for an equitable discharge?

[26] In the alternative, the appellant [SS: a guarantor] submits that the respondent’s conduct entitles him to a

discharge. He acknowledges that the motion judge correctly set out the test in Bank of Montreal v. Wilder, 1986 CanLII 3

(SCC), [1986] 2 S.C.R. 551, but maintains that the motion judge failed to apply the test and, instead, addressed the issue

of an alleged breach of the common law implied duty of good faith.

---------------------------- Contracts / DEPOSITS

42. Brown v. Godfrey, 2006 CanLII 16540 (Ont Div Ct, 2006) - forfeiture of deposit monies: forfeiture of deposit on breach

allowable even where not expressly required

43. Allied Canadian Acquisition Corporation v. 1012689 Ontario Limited, [2002] O.J. No. 289 (Ont Sup Ct, 2002) -

forfeiture of deposit monies: paid deposit may be retained on breach unless unconscionable to do so

44. Pleasant Developments Inc. v. Iyer, 2006 CanLII 10223 (Ont Div Ct, 2006) - desposit towards purchase of home may be

retained by vendor on breach by purchaser unless expressly agreed otherwise; exception where amount of deposit forfeited

is punitive or out of proportion to the losses suffered, in which case law of contractual penalties applies, or where

forfeiture is unconscionable

------------------------------------------- Contracts / WAIVER

- Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC) [elements of waiver]

------------------ Contracts / unconscionability test

[7] The parties agree that the three-part test for determining unconscionability is set out in Teitelbaum v. Dyson (2000),

7 C.P.C. (5th) 356, [2000] O.J. No. 4583 (S.C.), at para. 40, aff’d (2001), 2001 CanLII 32771 (ON CA), 151 O.A.C. 399,

[2001] O.J. No. 3483 (C.A.). That test requires a plaintiff to show that the defendant abused its bargaining power, preyed

upon the plaintiff, or that the bargain was improvident.

--------------------------- Contracts - dependent contractor - termination notice period

- McKee v. Reid's Heritage Homes Ltd. 2009 ONCA 916 (CanLII)

-------------------------- Contract interpretation / Evidence / parol evidence

3869130 Canada Inc. v. I.C.B. Distribution Inc., 2008 ONCA 396 (CanLII)

-------------------------- Contracts / restrictive covenants

Piresferreira v. Ayotte, 2010 ONCA 384 (CanLII)

- restrictive business/employment covenants

-------------------------- Contracts / Sale of Goods

- Prevost v. Gilmour, 2009 CanLII 19937 (Ont Div Ct, 2009) - discussion of Sale of Goods Act application to sale of

collector coins

-------------------------- CONTRACTS

6. Beer v. Townsgate I Ltd., 1997 CanLII 976 (ON CA) [contracts and illegality]

73. Hunter Engineering Co. v. Syncrude Canada Ltd., 1989 CanLII 129 (SCC) [fundamental breach]

47. Toronto Hydro Corporation v. Schmidt, 2009 CanLII 9481 (Ont Div Ct, 2009) - an argument by an account-holder that he

did not have to pay for electrical usage by unauthorized tenants was unsuccessful; terms of Hydro's "Conditions of

Service" were binding on the defendant despite not having been brought to his attention as contractual terms on policy

grounds given the highly regulated nature of the activity

38. Celebre v 1082909 Ontario Limited, 2007 CanLII 65609 (Ont Div Ct, 2007) - the court considers and reviews case law on

what constitutes 'fundamental breach' of a contract, and relies on a finding a fundamental breach to hold that enforcing a

clause limiting the defendant's liability would be unfair in the circumstances of the case

31. Fantl v. Transamerica Life Canada, 2013 ONSC 2298 (CanLII) [interesting reviews of law of implied contract, when terms

are implied into contract and maybe more]; affirmed on appeal wrt SOME points at CA

35. Toronto Hydro Corporation v. Schmidt, 2009 CanLII 9481 (Ont Div Ct, 2009) - where terms of Hydro's "Conditions of

Service" were not brought to the attention of the defendant before entering into an account agreement, the contractual

interpretation principle of 'business efficacy' would have inferred them as terms regardless

36. Celebre v 1082909 Ontario Limited, 2007 CanLII 65609 (Ont Div Ct, 2007) - a clause in a home inspection agreement

purporting to limit liability was not enforced in a 'contract of adhesion' (supplier-issued standard consumer contract)

where there was no true negotiation and consideration of the terms before the contract is executed, where the consumer was

under time pressure to close a house sale, and where the contract was only presented for consumer signature after part of

the inspection work had been completed

25. M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd. (1999) 170 D.L.R. 577 (S.C.C.) - re 'business efficacy'

principle in the interpretation of contracts

26. Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460 (CanLII) [duty of good faith within contract]

XX. Palkowski v. Ivancic, 150 A.C.W.S. (3d) 735, [2006] O.J. No. 3322 at para.16 - where contract must be written and

where statute of frauds can be excepted

------------------------------- CONTRACTS / illegality

- 1079022 Ontario Inc. (Nicolini Construction) v. Market Leadership Inc., 2009 CanLII 25607 (Ont Div Ct, 2009) - fee

forfeited where party not properly registered under Mortgage Brokers Act

Law Society Number #37308N / Website © Simon Shields 2005-2020