Real Estate Transactions in BC

Frustrating Events in Contracts

• A frustrating event is an unforeseen event that makes the contract impossible or radically different from what the parties intended.
• A change in law or regulation that makes performance more difficult or expensive would generally not frustrate a contract.
• Self-induced frustration occurs when a party intentionally or negligently causes the frustrating event.
• An employer can terminate a contract due to frustration if the employee's illness or injury makes it impossible for them to perform their duties.
• Frustration differs from mistake in that mistake occurs at the time of entering the contract, while frustration arises after the contract is formed.

Real Estate Transactions in British Columbia

• The principle of "buyer beware" means buyers are responsible for conducting their own due diligence and investigating the property before purchasing.
• A seller can be found liable for not disclosing a latent defect (hidden defect) if they knew or ought to have known about it, and it materially affects the value or usability of the property.
• The case of Krawchuk v. Scherbak determined that a vendor (seller) can be liable for not disclosing a latent defect, even if they were unaware of it.

Misrepresentation in Contracts

• A party who discovers they made an untrue statement has a responsibility to correct it.
• In a landlord example, the misrepresentation could involve the landlord making false statements about the property’s condition or amenities.
• Negligent misrepresentation occurs when someone makes a statement without reasonable care and it causes financial harm to another party.
• The phrase "a half-truth is the most dangerous of lies" implies that withholding important information or presenting a misleading version of the truth can be as harmful as a complete lie.
• Negligent misrepresentation derives from the tort of negligence.
• To protect themselves, buyers in real estate transactions should:
  • Conduct thorough due diligence and inspections.
  • Seek legal advice from a qualified real estate attorney.
  • Obtain a home inspection report.
  • Carefully review all documents related to the transaction.
• Rescission means canceling the contract and restoring the parties to their original positions.
• The company in the example involving the employee was obligated to return the money because the employee's misrepresentation was material to the agreement.
• Incomplete and inaccurate information during a real estate transaction can result in:
  • The buyer being able to rescind the contract
  • The buyer bringing an action for damages against the seller
• A court may offer a remedy for innocent misrepresentation such as rescission, damages, or both.
• Possible remedies for negligent misrepresentation can include damages, rescission, or an injunction.
• “Damages” refers to the financial compensation awarded to a party to compensate for losses suffered due to a legal wrong.
• When a contract is rescinded, the parties are returned to the position they were in before entering the agreement.
• Fraudulent misrepresentation exists when a party intentionally makes a false statement to deceive the other party and induce them to enter the contract.
• Courts generally look more favorably upon innocent misrepresentation than fraudulent misrepresentation and are more inclined to grant relief to the aggrieved party.
• In a vehicle misrepresentation scenario, the purchaser may have options such as:
  • Rescinding the contract and seeking a full refund
  • Seeking damages for financial loss or emotional distress
  • Taking legal action against the seller
• A defining characteristic of fraudulent misrepresentation is that the party making the false statement intended to deceive the other party.
• Alleging fraud without strong evidence can have serious consequences, including:
  • The possibility of a lawsuit for defamation or malicious prosecution
  • Damage to one's reputation
• The basis for establishing fraud in court involves proving:
  • A false statement was made
  • The statement was made knowingly or recklessly
  • The false statement was relied upon by the other party
  • The party suffered damages as a result.
• In the case of 887574 Ontario Inc. v. Pizza Pizza Ltd., the court did not find sufficient evidence to support the allegations of fraud.
• Negligent misrepresentation involves making a statement without reasonable care, causing harm to another party.
• The incorrect accounting practices in the franchise case led to an award of damages to the franchise owners.
• Parties may refuse to settle fraud cases out of court due to:
  • High stakes involved
  • Desire to establish legal precedent
  • Fear of admitting wrongdoing
• Factors that influence the perception of fraud in a civil action include:
  • The nature of the misrepresentation
  • The intent of the party making the misrepresentation
  • The harm suffered by the other party
• A primary distinction between innocent and fraudulent misrepresentation is the intent of the party making the false statement.
• To protect themselves from misrepresentation, purchasers should:
  • Conduct thorough due diligence
  • Seek legal advice
  • Review contracts carefully
• Ms. Burkardt initially accepted a settlement amount of $25,000.
• The court found that the original settlement accepted by Ms. Burkardt was unconscionable due to:
  • Her lack of legal representation at the time
  • The unequal bargaining power between her and her husband
• Ms. Burkardt was awarded $150,000 in damages after the court rescinded the original settlement.
• The standard threshold for proving unconscionability in family law cases involves showing that the agreement is:
  • Unfair
  • Unjust
  • One-sided
• The final amount recalculated by the court for the husband to pay his wife in the Sera v. Sera case was $175,000.
• The key issue in the Birch v. Union of Taxation Employees case revolved around whether an arbitration clause in a collective agreement was unconscionable.
• A scenario least likely to raise the issue of unconscionability is when both parties are represented by counsel and the terms of the agreement are freely negotiated.
• To establish unconscionability, courts typically require proof of:
  • Substantive unfairness (unjust terms)
  • Procedural unfairness (unequal bargaining power, lack of access to legal advice)
• In the context of the Lydian Properties case, the transaction was mostly characterized by a lack of transparency and the use of misleading language.