Legally Speaking - June 2008 (420)
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Legally Speaking (420, June 2008)

 

Number 420, June 2008

The Seller Wants Out—Notice of Acceptance of Offer Given to Spouse

When a party wants out of a deal, they often ask their lawyer to review the contract and the circumstances surrounding its making to see if they have a basis for getting out of it. When put under a “lawyer microscope,” the terms of the contract often can’t stand scrutiny. Here’s one that did.

In a recent Ontario case,(1) the lawyer for the seller who wanted out of the contract raised four grounds to argue that the contract was invalid. One of those grounds was that the communication of the acceptance of the counter-offer wasn’t made within the appropriate time period.

The property was owned by a Mrs. Footman, but throughout the negotiations the buyer’s agent dealt with both Mrs. Footman and her husband, who weren’t represented by any real estate agent. When Mrs. Footman’s counter-offer was accepted by the buyer, the buyer’s agent communicated the acceptance by telephone to Mr. Footman. Mr. Footman advised the agent that Mrs. Footman was out of town, but that the accepted contract could be dropped off at their front door, prior to the time given for acceptance in Mrs. Footman’s counter-offer. That was done, but Mrs. Footman didn’t return to her home and didn’t know of the accepted contract until after the time given for acceptance in her counter-offer. 

Generally, a contract is formed not just when the offer is accepted, but when that acceptance is communicated by the offeree to the offeror. Therefore, the issue was whether the acceptance of the contract was communicated to the seller within the time provided. 

The contract provided that: “This offer, any counter offer, notice of acceptance thereof, or any notice shall be deemed given and received, when hand delivered to the address for service herein . . .”  The address for service was the Footman home. 

As Mr. Footman had notice of the acceptance of the contract in time, the issue turned on whether Mr. Footman was Mrs. Footman’s agent. The court reviewed the facts in detail: Mr. Footman was present at all meetings with the buyer’s agent, Mr. Footman dominated the discussions and Mr. Footman conducted all of the negotiations on Mrs. Footman’s behalf. The court found a reasonable person who was present at those meetings would have believed Mr. Footman was the agent for Mrs. Footman. The court found Mr. Footman had the ostensible authority(2) on to act on Mrs. Footman’s behalf and had the authority to receive the accepted contract on her behalf.

The court also favourably cited a previous case that held an implied term of any offer is that there would be some person available at the relevant time to receive the acceptance.(3) That means Mrs. Footman couldn’t frustrate the process by making herself unavailable. However, as the court determined Mr. Footman was her agent and she was deemed to have received notice, the court didn’t need to decide this issue.

When dealing with a spouse who isn’t the owner, a REALTOR® should always exercise extreme caution. Often the spouse you’re dealing with doesn’t hold a written power of attorney and you may have to rely on the “ostensible authority” argument. The best practice is that the acceptance of the offer should be communicated to the owner of the property, not the owner’s spouse or agent.

Edward L. Wilson
Lawson Lundell LLP

  1. Pyne v. Jennifer Brocklesby Footman, 2007 CanLII 12712 (ON S.C.).
  2. “Ostensible authority” means having the apparent authority to do something or represent another person or entity, based on the conduct of the principal.
  3. Carmichael v. Bank of Montreal, [1972] 3 W.W.R. 175.
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