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Contracts - Annulment Clause. Gu v. Nothdurft
In Gu v. Nothdurft (Ont CA, 2023) the Court of Appeal considered whether an 'annulment clause', here within a real estate APS, carried with it a duty on the one claiming annulment to 'act reasonably':[9] On the summary judgment motion, the appellants relied on paragraph 10 of the OREA standard form APS, commonly referred to as the “annulment clause”. That paragraph provides, in part, that where a written objection is made to title and which “Seller is unable or unwilling to remove … and which Buyer will not waive … [the] Agreement … shall be at an end” and the deposit returned.
[10] The motion was apparently argued on the assumption that paragraph 10 applied. The motion judge found that the appellants were not entitled to rely on it to end the contract because the appellants had not exercised that power reasonably. The motion judged relied on Mason v. Freedman, 1958 CanLII 7 (SCC), [1958] S.C.R. 483, which held that a vendor who seeks to avoid a contract under a clause of this type is required to exercise her right reasonably, make a genuine effort to satisfy the requisition, and have a good reason for not being able to do so. The motion judge found it significant, in this respect, that there was no evidence from the appellants as to why they could not have availed themselves of any of the standard means of clearing title on closing such as giving an undertaking to pay out the writs from the sale proceeds, or paying the equivalent amount into court pending resolution of any underlying dispute.
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[12] The appellant also argued that the motion judge erred in finding that paragraph 10 of the OREA standard form APS did not entitle the appellants to treat the APS as at an end because there was no credible evidence that the appellants had made reasonable efforts to remove the writs of execution.
[13] The motion judge made no error in so holding. The motion judge did not err in principle in finding that the appellants were obligated to exercise the power of annulment conferred by paragraph 10 reasonably. Neither did he err in finding there was no credible evidence to explain why the writs of execution could not have been satisfied from the sale proceeds and removed from title. The motion judge’s finding that the appellants had made no effort to achieve this was amply supported by the record before him.
[14] The motion judge’s analysis displayed careful attention to both the evidential record and the governing authorities and there is no basis on which to interfere with the finding that the appellants were in breach of the APS.
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