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Property - Statute of Frauds - Written Sale Agreement Required. 2730453 Ontario Inc. v. 2380673 Ontario Inc. [part performance exception]
In 2730453 Ontario Inc. v. 2380673 Ontario Inc. (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from an order that the appellant specifically perform an oral agreement.
These passages consider the 'part performance' exception to the Statute of Frauds [s.4 'Writing required for certain contracts'] provision that contracts of sale of land must be in writing:[1] An oral agreement to sell land is not generally enforceable. Section 4 of the Statute of Frauds, R.S.O. 1990, c. S.19 provides that no “action shall be brought ... to charge any person upon any contract or sale of lands … unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.”
[2] The doctrine of part performance is a recognized exception to this general rule. A party to an oral agreement for the sale of land cannot avoid its enforcement by pointing to the absence of a signed agreement (or note or memorandum of it) if the doctrine of part performance, which has both an evidentiary and a detrimental reliance aspect, applies.
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[6] I conclude, for the reasons below, that the trial judge did not err. The detrimental reliance aspect of the doctrine requires that the court be satisfied the party seeking to enforce the oral agreement acted to its detriment by irremediably carrying out its obligations, or a significant portion of them, under the oral agreement, while the other party stood by, making it inequitable to allow the other party to rely on s. 4 of the Statute of Frauds. For the purpose of determining the extent to which there was part performance and resulting detriment, the court may look at what the party seeking to enforce the agreement did to achieve closing of the agreed upon transaction, and the extent to which that conduct was acquiesced in or encouraged by the party seeking to avoid enforcement.
[7] The conduct the trial judge found had occurred included acts of the respondent that were required to complete the agreed to real estate transaction. Those acts were performed in dialogue with and in response to communications on behalf of the appellant concerning what needed to be done, and which documents needed to be prepared and signed, to complete the purchase – communications that showed the appellant was also “intending to close an agreement that had already been reached”. The trial judge was not required to focus only on the last step of the closing process – the refused tender of funds. His findings that the respondent’s performance amounted to part performance, that this performance was to its detriment, and that it would be inequitable to permit the appellant to rely on the Statute of Frauds, were legally available on the record. They are entitled to deference.
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[23] Turning to the defence that s. 4 of the Statute of Frauds rendered the oral sale agreement unenforceable, the trial judge rejected the respondent’s contention that there was a written document, signed by the appellant or someone authorized by it, that met the requirements of s. 4. The respondent does not challenge this finding on appeal.
[24] The trial judge did find, however, that there was part performance and detriment sufficient to make it inequitable for the appellant to rely on s. 4, and therefore that the oral sale agreement should be enforced. After discussing the applicable principles, including the requirement for detrimental reliance, he reached certain key conclusions. I set them out below:I find that the following acts of part performance by the [respondent] are unequivocally referable to the land in dispute:
a. Obtaining an environmental assessment of the property;
b. Obtaining survey and title searches on the property;
c. Conducting other due diligence related to the property;
d. Negotiating and preparing the commission agreement among the [respondent] and the brokers;
e. Retaining legal counsel to close the agreement;
f. Drafting, revising, and negotiating the written agreement of purchase and sale for the property;
g. Delivering the documents required on closing;
h. Obtaining, delivering, and tendering the certified cheque for the full amount of the purchase price.
I also find that the following acts of part performance by the [appellant] are connected to the property in dispute:
a. Retaining legal counsel to close the agreement for the purchase and sale of the property;
b. Negotiating over the status of the easement on the property;
c. Reviewing and revising the draft agreement of purchase and sale, including providing a revised version of Schedule A to that agreement to the [respondent] and obtaining the consent of the [respondent] to the revisions;
d. Providing draft copies of the [appellant’s] closing certificate and statutory declaration and the [appellant] executing those documents;
e. Negotiating over the method by which the [respondent] would deliver the agreed upon purchase price on closing.
Each of these acts of part performance relate directly to the property in dispute. They are all directly tied to the agreement the parties reached in September 2019 regarding the sale of the property. All of this conduct is unequivocally referable to the property in dispute.
The second step in the analysis is to consider whether or not the conduct, in and of itself, indicates that there has been some dealing with the land: Erie Sand & Gravel, at para. 90. In my view, much of the conduct described above suggests a pre-existing agreement in respect of the land. In particular, the [appellant] prepared and delivered through [his broker] a revised Schedule A to the agreement of purchase and sale that accurately reflected the prior agreement between the parties, namely, that the [respondent] was to take title as-is and subject to the existing easement. Moreover, the [appellant] retained a lawyer who wrote to the [respondent’s] lawyer to confirm that he acted “for the [appellant] in the above transaction” and to confirm that executed versions of the documents would be delivered “to your office on closing.” This is strong evidence that the [appellant] was intending to close an agreement that had already been reached, not to negotiate toward a possible agreement with the [respondent]. In these circumstances, judged by the standards on which reasonable people act, I find that there had been some dealing with the land.
In carrying out its acts of part performance, the [respondent] acted to its detriment in carrying out its obligations in reliance. It also proved acts of part performance sufficiently referable to some dealing with the land such that it would make it inequitable for the [appellant] to rely on s. 4 of the Statute of Frauds to avoid performance. I find that the oral agreement should be enforced. ANALYSIS
The Issue
[25] The appellant submits, correctly, that for there to be a proper finding of part performance sufficient to avoid the requirements of s. 4 of the Statute of Frauds, both the evidentiary aspect and the detrimental reliance aspect of the doctrine must be satisfied. Conduct that satisfies the evidentiary aspect of the doctrine – because it is unequivocally referable to the property in dispute and shows some dealing with the land – is insufficient unless the detrimental reliance aspect of the doctrine is also satisfied.
[26] In Erie Sand and Gravel Limited v. Tri-B Acres Inc., 2009 ONCA 709, 97 O.R. (3d) 241, Gillese J.A. explained, at para. 79, the need to satisfy the two aspects of the doctrine of part performance:The first aspect is detrimental reliance which ... requires a party to prove its acts of performance. Without detrimental reliance there can be no inequity in relying on the Statute of Frauds, thus, it is the first hurdle to be met. The second aspect of the doctrine ... relates to Equity’s requirement that the acts of part performance sufficiently indicate the existence of the alleged contract ... . The [first aspect] is a matter of substantive law based on the rationale for the doctrine of part performance, whereas the [second aspect] is primarily evidentiary in nature. [27] The appellant does not quarrel with the trial judge’s findings that the conduct was unequivocally referable to the property in question and indicated that there was “some dealing with the land”, which are the elements of the evidentiary aspect: Erie, at paras. 89-90. But, the appellant argues, despite adverting to the detrimental reliance aspect when describing the doctrine, the trial judge did not apply it. Although he made a conclusory statement that the respondent “acted to its detriment in carrying out its obligations”, the appellant maintains that none of the conduct the trial judge referred to met that criterion. The appellant argues that the respondent had one obligation under the terms of the oral agreement of sale found by the trial judge – to pay the purchase price on closing. The respondent offered to pay the funds, and tendered a certified cheque, but payment was never accepted, resulting in no detriment. The other conduct referred to by the trial judge may have shown that there was an agreement, but none of that conduct involved performance by the respondent of the oral sale agreement’s obligations. Any detriment arising from that conduct was irrelevant; in any event it was not irremediable or otherwise sufficient to make it inequitable to allow the appellant to rely on the Statute of Frauds.
Discussion
[28] I disagree with the appellant that the trial judge erred by concluding that the detrimental reliance aspect of the doctrine of part performance was met.
[29] The detrimental reliance aspect was described as follows at para. 64 of Erie, citing Hill v. Nova Scotia (Attorney General), 1997 CanLII 401 (SCC), [1997] 1 S.C.R. 69: “[I]f one party to an otherwise unenforceable agreement stands by while the other party acts to its detriment by performance of its contractual obligations, the first party will be precluded from relying on the requirements in the Statute of Frauds to excuse its own performance.”
[30] This formulation has been the substantive core of the part performance doctrine since it was recognized. In Hill, at para. 10, Cory J. quoted with approval the following statement from the House of Lords in Steadman v. Steadman, [1976] A.C. 536, at p. 558, per Lord Simon:Where, therefore, a party to a contract unenforceable under the Statute of Frauds stood by while the other party acted to his detriment in performance of his own contractual obligations, the first party would be precluded by the Court of Chancery from claiming exoneration, on the ground that the contract was unenforceable, from performance of his reciprocal obligations; and the court would, if required, decree specific performance of the contract. Equity would not, as it was put, allow the Statute of Frauds “to be used as an engine of fraud.” This became known as the doctrine of part performance – the “part” performance being that of the party who had, to the knowledge of the other party, acted to his detriment in carrying out irremediably his own obligations (or some significant part of them) under the otherwise unenforceable contract. [Emphasis added.] [31] In this case, the detrimental reliance aspect of the doctrine was recited by the trial judge as follows:Justice Cory stated that a verbal agreement that has been partly performed will be enforced: Hill, at para. 11. The very purpose of the doctrine of part performance is to avoid the inequitable operation of the Statute of Frauds. This is why the requirement that a contract for the sale of land be in writing will yield in the face of part performance: the part performance fulfills the very purpose of the written contract. If party A to an otherwise enforceable agreement stands by while party B acts to its detriment by performance of its contractual obligations, party A may not rely on the requirements in the Statute of Frauds to excuse its own performance: Erie Sand & Gravel, at para. 64. [32] The trial judge concluded that the detrimental reliance aspect (as well as the evidentiary aspect) of the doctrine had been met when he stated:In carrying out its acts of part performance, the [respondent] acted to its detriment in carrying out its obligations in reliance. It also proved acts of part performance sufficiently referable to some dealing with the land such that it would make it inequitable for the [appellant] to rely on s. 4 of the Statute of Frauds to avoid performance. I find that the oral agreement should be enforced. At paras 34-59 the court considers (and dismisses), in light of the case law, the appellant's arguments that the equitable doctrine of part performance does not apply - including arguments relating to acts that may be ones of part performance, whether detriment must be irremediable, and whether the doctrine of de minimus applies to the detriment.(4) Conclusion
[60] The trial judge’s ultimate decision to give effect to the equitable doctrine of part performance, a doctrine rooted in fairness, is subject to deference, absent reversible error. It was for the trial judge to assess whether there was detriment from the respondent’s performance of its obligations. The trial judge considered that there was, and although his conclusion was expressed briefly, I am not persuaded that this finding was not legally available as the appellant contends.
[61] The trial judge was aware of, and cited, the relevant principle that “[i]f party A to an otherwise enforceable agreement stands by while party B acts to its detriment by performance of its contractual obligations, party A may not rely on the requirements in the Statute of Frauds to excuse its own performance”. His findings of fact show that the appellant did stand by in this manner. His conclusion, that it was inequitable in the circumstances to allow the appellant to rely on the Statute of Frauds, must be taken to reflect those findings and his application of that principle. The trial judge’s conclusion is not tainted by any reversible error. I see no basis to interfere with it.
[62] I would therefore reject the appellant’s single ground of appeal.
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