The Second Opinion: “Use it or Lose it” — The BCCA Warns Parties to Act Quickly in Response to a Fundamental Breach (or Suffer the Consequences)
The following post on the Canadian Appeals Monitor blog written by Anthony Alexander on November 14, 2014, may be of interest to readers of this blog:
A recent ruling of the British Columbia Court of Appeal, A & G Investments Inc. v. 0915630 B.C. Ltd., 2014 BCCA 425, provides a useful primer on the available mechanisms for bringing a contract to an end. These include:
- the committing of a fundamental breach (leading to termination of the agreement if the breach is acted upon by the innocent party);
- the triggering of an express termination provision; and
- the acceptance by the innocent party of a repudiation (thereby causing the agreement to be rescinded).
The case also usefully reminds us that a party confronted by a fundamental breach must act quickly if it wishes to use that breach to justify terminating the agreement.
The case involved an agreement to purchase real property, with the deal to close on December 18, 2012. The vendor was required to take certain steps (including the obtaining of subdivision approval) as a precondition to closing.
The contract specified that “time was of the essence.” The inclusion of such a provision indicates that a failure of timely performance will be considered a fundamental breach of the contract, permitting termination by the innocent party. This power must be expressly exercised by the innocent party, however. A failure by the innocent party to act on the fundamental breach may be treated as an election to affirm the contract’s continuing existence. Such an affirmation limits the innocent party’s remedies to a claim for damages.
agreement of purchase and sale contracts fundamental breach real estate Real Property repudiation rescission termination