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Contracts - Tendering (Peformance). 1785192 Ontario Inc. v. Ontario H Limited Partnership
In 1785192 Ontario Inc. v. Ontario H Limited Partnership (Ont CA, 2024) the Ontario Court of Appeal allowed an appeal, here where the issue was the adequacy of the tender made in a rent-to-own option to purchase:The option contract
[35] The Supreme Court explained the nature of options in Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, 1995 CanLII 87 (SCC), [1995] 2 S.C.R. 187, at para. 27:An option contract is an antecedent contract because it precedes the contract of purchase and sale that will result if the opportunity provided by the option is “seized upon” or exercised. Once an option is exercised, the parties discharge their obligations under the option contract by entering the contract of purchase and sale. The exercise of an option is the election to buy property on the terms specified in the option agreement, and is the equivalent of accepting the irrevocable offer made in the option. One cannot exercise the same option twice. The exercise of the option must mean the acceptance of the offer. The acceptance must be unconditional, must only be made once, and must be made in accordance with the terms of the option. [36] There is no dispute that the Tenant gave valid notice that it was exercising the options.
[37] The option clauses constituted an irrevocable offer to the Tenant to purchase the properties “for a purchase price equal to the average of the appraised fair market value of the Leased Premises as determined by two appraisers, one chosen by the Landlord and one chosen by the Tenant… If the Option is exercised in the manner herein provided, the Landlord and Tenant shall have, and be deemed to have, entered into a binding contract for the sale and purchase of the Leased Premises, which will be completed upon the terms herein contained on the date set out by the Tenant in the written notice of exercise of the Option, provided that such date can be no earlier than 120 days following the date such notice is delivered to the Landlord…”.
[38] The application judge found that the Tenant exercised the option, which thereby created an obligation on the Landlord to sell the properties, and the Tenant to purchase them, at the price set using the valuation process stipulated in the option clauses. The application judge made no error in so finding.
[39] The issue for the appeal is not whether the option was exercised – it was – but whether the application judge erred in not finding that the Tenant breached the contract of purchase and sale that resulted from the exercise of the option.
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Was there a breach of contract?
[47] Having determined that the option was validly exercised and the application judge made no reviewable error in determining that both parties satisfied their obligations to obtain fair market appraisals, did either party thereafter breach the contract?
[48] Although the Landlord disputes the point on appeal, a necessary implication of the application judge’s holding is that she found the Landlord to have breached the contract of purchase and sale by refusing to convey title to the Tenant. She explicitly found that the Tenant’s partial tender was adequate and not a breach of its obligation to tender the midpoint of the two valuations.
[49] In my view, both of these conclusions by the application judge are in error.
[50] Having exercised the option, the Tenant was obligated to purchase – and the Landlord was obligated to sell – at the purchase price established using the methodology specified in the option. The parties were obligated to take all necessary steps to effect the purchase and sale on those terms.
[51] The application judge accepted the Tenant’s argument that partial tender was acceptable, relying on Kingsberg Developments Ltd. v. K Mart Canada Ltd., (1983), 1982 CanLII 1881 (ON SC), 40 O.R. (2d) 348 (H.C.), Self Unit Acquisitions Inc. v. Cherokee-Oakville Property G.P. Inc., 2007 CarswellOnt 5115 (S.C.), and Vulcan Packaging Inc. v. Capital Ventures Group Inc. (1990), 1990 CanLII 6764 (ON CA), 71 O.R. (2d) 554 (C.A.).
[52] Each of these cases arose from a similar factual situation: a purchaser was in some way dissatisfied with the quality of the property to be purchased and sought an order for specific performance but at a reduced purchase price. The purchaser registered a certificate of pending litigation on title to prevent the vendor from dealing with the property before the dispute could be resolved at trial. The vendor then brought an application to have the certificate discharged from title. The discharge of the certificate was a matter of judicial discretion, to be informed by several factors. One of those factors was whether the purchaser who was resisting the application for discharge was willing to post security. In an ordinary case, the amount posted would be equivalent to the purchase price. But in an abatement case, the question was whether the amount to have been posted should be reduced to take into account the alleged deficiency in the property. The issue in Vulcan was stated as follows:The only issue in this appeal is whether a purchaser of land who properly claims specific performance of an agreement for sale with an abatement is obliged as a matter of law to quantify the amount of the abatement claimed and pay it into court or in escrow in order to resist a vendor's application to obtain an order expunging the agreement from the registry. [53] The Tenant, in the present appeal, argues that the abatement cases support the proposition that partial tender, reduced by the amount of the purchase price that is disputed, is sufficient tender, provided some form of security is provided for the remainder.
[54] The Landlord argued below (and before this court) that the tender was not adequate because options must be exercised strictly, and that the obligation under the option was to tender at the midpoint of the two valuations. The Tenant did not do that, and therefore it did not validly exercise the option.
[55] The application judge rejected the Landlord’s characterization of the obligation to tender as falling within the option rather than the ensuing bilateral contract. She noted that the Landlord provided no argument to assist the court in determining whether tender was sufficient, and concluded summarily “I am satisfied that the steps taken by the Tenant on closing were sufficient.”
[56] In my view, although the Tenant’s obligation to tender was generated by the Tenant’s exercise of the option, the application judge made no error in finding that the act of tender was not a matter of exercising the option, but of taking the steps required to affect the purchase under the ensuing bilateral contract of purchase and sale. Accordingly, the Landlord’s argument from the strict obligation to comply with option was misguided and left the application judge without adequate assistance to assess the Tenant’s argument that its tender was sufficient. As a result, the application judge’s analysis of whether the Tenant complied with its obligation to tender was underdeveloped and, in my view, erroneous.
[57] The Tenant did not provide any authority that unambiguously held that a purchaser can unilaterally withhold a portion of the purchase price where there is a dispute about what the purchase price is. The abatement cases where a vendor seeks to discharge a certificate of pending litigation do not address this point and are not authority for the proposition advanced.
[58] Were this court to accede to the proposition advanced by the Tenant, it would mean that vendors would be required to convey property in any circumstance where, as here, the purchaser disputes the purchase price, potentially resulting in a substantial part of the proceeds of sale being held up indefinitely, pending years of litigation. In the present case, the Landlord did not agree to the funds being held in trust, and the funds were not even placed in trust irrevocably, but were later returned to the Tenant, which used them to purchase other car dealerships.
[59] Accordingly, I would find that the Tenant materially breached the contract of purchase and sale by only tendering roughly half of the full purchase price. It follows from this that the Landlord was not in breach by refusing to convey title. . The Rosseau Group Inc. v. 2528061 Ontario Inc.
In The Rosseau Group Inc. v. 2528061 Ontario Inc. (Ont CA, 2023) the Court of Appeal considers an issue of tendering performance in a breached APS breach case:(ii) No Requirement to Tender
[37] 252 argues that although it indicated on June 13, 2017 that it was taking the position the APS was at an end, Rosseau Group did not accept the repudiation, and demanded a closing date of September 19, 2017. It submits that Rosseau Group was therefore required not only to be ready, willing, and able to close on that date, but to demonstrate that by tendering the closing funds and other required documents. 252 argues that the trial judge should have treated the failure to tender as fatal to Rosseau Group’s claim.
[38] I disagree.
[39] Because Rosseau Group did not accept 252’s anticipatory repudiation of the APS, but instead rejected it, it kept the APS alive, and both parties remained bound to perform their obligations on the closing date. In order to rely on 252’s failure to close on September 19, 2017, Rosseau Group had to be ready, willing, and able to close on that date: Domicile Developments Inc. v. MacTavish (1999), 1999 CanLII 3738 (ON CA), 45 O.R. (3d) 302, 175 D.L.R. (4th) 334 (C.A.), at paras. 14-15. But that obligation was satisfied if Rosseau Group was (as the trial judge found) actually ready, willing, and able to close. For 252’s argument to be correct, Rosseau Group’s obligation had to extend to include a requirement to tender on a party who had unequivocally indicated that the tender would be useless because it would not close.
[40] I see no error in the trial judge’s conclusion that a tender was not required. Although tendering is one way of showing that a party is ready, willing, and able to close, it is not the only way. “While tender is the best evidence that a party is ready, willing and able to close, tender is not required from an innocent party enforcing his or her contractual rights when the other party has clearly repudiated the agreement or has made it clear that they have no intention of closing the deal” (emphasis added): Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, 430 D.L.R. (4th) 296, at para. 45, leave to appeal refused, [2019] S.C.C.A. No. 55 The rationale for this is clear: “the law does not require what would be a meaningless or futile gesture”: Time Development Group Inc. (In trust) v. Bitton, 2018 ONSC 4384, at paras. 56-7.
[41] 252’s reliance on the decision of this court in 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, 438 D.L.R. (4th) 566 for the proposition that tender was required is misplaced. 1179 Hunt Club was not a case of a party who was in fact ready, willing, and able to close being denied a contractual remedy because it failed to tender on a party who had indicated that such a tender would be useless.
[42] In 1179 Hunt Club, the vendor rejected the purchaser’s anticipatory repudiation of the agreement, insisted that the transaction close on a specific date, and indicated that there would be immediate pursuit of legal remedies if the purchaser did not perform. The application judge found, and this court agreed, that the vendor was not in fact ready, willing, and able to close on the date it insisted upon, because it was unable to transfer title to the purchaser: at paras. 2, 17, 20, 21, 22 and 27. It was in that context − a party who was in fact not ready to perform insisting on strict performance from the other party − that Lauwers J.A. referred to the failure to tender as being “fatal” to the vendor’s position that it could “render perfection in its own performance”: at para. 23. Later in his reasons, Lauwers J.A. brought those two key aspects together when he explained: “[h]aving set the date, here the vendor did not trouble itself to tender, and in fact could not have tendered because on that day it was incapable of transferring title” (emphasis added): at para. 27.
[43] Accordingly, 1179 Hunt Club does not assist 252, because it does not stand for the proposition that a failure to tender by a party who is ready, willing and able to close precludes their claim.
(iii) The Trial Judge Did Not Err in Finding Rosseau Group Was Ready, Willing, and Able to Close
[44] 252 goes on to argue that the trial judge erred in finding that Rosseau Group was in fact ready, willing, and able to close. It argues that although the trial judge found that Rosseau Group had sufficient funds available from related entities to close the transaction, this was insufficient as it had not taken possession of those funds itself. It also argues that although the trial judge found Rosseau Group could assume the BMO Mortgage, this too was insufficient because it took no steps to do so. And it argues that the trial judge should have considered herself bound by the findings about readiness to close made on the CPL motion.
[45] I disagree.
[46] On the question of funds for closing, the trial judge’s finding that the funds required to close were available to Rosseau Group was sufficient. With that availability, it was ready, willing, and able to close. The added step of symbolically depositing the funds in its own account for a transaction that 252 would not complete would have been “a meaningless or futile gesture” of the type the law does not insist upon. . 6844987 Canada Inc. v. The United People of Canada/Les Peuple Unis du Canada
In 6844987 Canada Inc. v. The United People of Canada/Les Peuple Unis du Canada (Sup Ct, 2022) the court holds that 'tendering' requires actual making of a payment, not only a promise to do so:[74] Tendering money requires a party to do more than announce that they are prepared to pay: Archdekin v. McDonald, 1912 CanLII 651, at p. 666. Based on the record before me, I find that TUPOC has never tendered the money payable under the Agreement and the lease.
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