There seems to be a continuing difficulty when we are talking about Offers and Agreements of Purchase and Sale. When do we use them? And, why all the confusion?
Contract Law
There’s no confusion here. You start out with an Offer and then, when the other side accepts it, you have a deal and it’s now an Agreement of Purchase and Sale.
Real Estate Forms
There was a lawyer in Toronto who practiced law in the ‘50’s, ‘60’s, and ‘70’s by the name of Edmund Brown. He was an absolute “wordsmith” and he could say in 10 words what others might say in 30 words.
The problem arose when he was approached to draft Forms for two separate and distinct legal stationers, Dye & Durham and Newsome & Gilbert.
When it came to Dye & Durham the document was called an “Offer to Purchase”. Now, when Newsome & Gilbert basically wanted the same document, that name was already taken, so Brown suggested “Agreement of Purchase and Sale”.
Those were the titles to the two documents and they were placed in bold print at the top of page 1.
It was interesting that Dye & Durham produced and printed up documents for TREB and Newsome & Gilbert did the same for some of the smaller Boards in Ontario.
Edmund Brown drafted the wording for both, but sometimes he would use slightly different wording.
As time went by, the legal stationers were replaced by electronic versions of the same documents. OREA inherited its document from Newsome & Gilbert, so it was called “Agreement of Purchase and Sale”.
Title
Now, when we start off with a transaction, we start with an Offer, not an Agreement. Yet, in bold print on the first page is the name “Agreement of Purchase and Sale”.
First Line
It reads as follows:
“This Agreement of Purchase and Sale dated this ………………….. day of ……………………………………………………………………………………… 20……..”.
At the start, it’s really just an Offer.
Deposit
It makes reference to “as otherwise described in this Agreement”. Yet, we are still at the Offer stage.
Further references are as follows:
“to be held in trust pending completion or other termination of this Agreement and to be credited toward the Purchase Price on completion. For the purposes of this Agreement, “Upon Acceptance” shall mean that the Buyer is required to deliver the deposit to the Deposit Holder within 24 hours of the acceptance of this Agreement. The parties to this Agreement hereby acknowledge that, unless otherwise provided for in this Agreement, the Deposit Holder shall place the deposit in trust in the Deposit Holder’s non-interest bearing Real Estate Trust Account and no interest shall be earned, received or paid on the deposit.”
There were five additional references to this Agreement marked in bold.
Schedules
“SCHEDULE(S) A………………………………………………………………………………………………..attached hereto form(s) part of this Agreement.
Irrevocability
Here’s the reference:
“after which time, if not accepted, this offer shall be null and void and the deposit shall be returned to the Buyer in full without interest.”
At this point, there is a correct reference to the document actually being an Offer in contract law.
Completion Date
“This Agreement shall be completed by no later than 6:00 p.m. on the ………….. day of …………………………………………… 20 …………… Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.
That’s of course, assuming that the Offer became an Agreement.
Notices
“The Seller hereby appoints the Listing Brokerage as agent for the Seller for the purpose of giving and receiving notices pursuant to this Agreement. Where a Brokerage (Buyer’s Brokerage) has entered into a representation agreement with the Buyer, the Buyer hereby appoints the Buyer’s Brokerage as agent for the purpose of giving and receiving notices pursuant to this Agreement.
And further,
“Any notice relating hereto or provided for herein shall be in writing. In addition to any provision contained herein and in any Schedule hereto, this offer, any counter-offer, notice of acceptance thereof or any notice to be given or received pursuant to this Agreement or any Schedule hereto (any of them, “Document”) shall be deemed given and received when delivered personally or hand delivered to the Address for Service provided in the Acknowledgement below, or where a facsimile number or email address is provided herein, when transmitted electronically to that facsimile number or email address, respectively, in which case, the signature(s) of the party (parties) shall be deemed to be original.”
The interesting contractual question here is whether the provision applies to Offer negotiating, or will not commence until such time as we actually have acceptance and therefore an agreement.
Chattels Included
“Unless otherwise stated in this Agreement…”.
Title Search
“the date on which the conditions in this Agreement are fulfilled or otherwise waived…”.
Title
“Provided that the title to the property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in this Agreement….”
Closing Arrangements
“Where each of the Seller and Buyer retain a lawyer to complete the Agreement of Purchase and Sale of the property…”.
Inspection
“Buyer acknowledges having had the opportunity to inspect the property and understands that upon acceptance of this offer there shall be a binding agreement of purchase and sale between Buyer and Seller.”
And further,
“The Buyer acknowledges having the opportunity to include a requirement for a property inspection report in this Agreement and agrees that except as may be specifically provided for in this Agreement, the Buyer will not be obtaining a property inspection or property inspection report regarding the property.”
Insurance
“…in the event of substantial damage, Buyer may either terminate this Agreement and have all monies paid returned without interest or deduction or else take the proceeds of any insurance and complete the purchase.”
Planning Act
“This Agreement shall be effective to create an interest in the property…”.
Agreement in Writing
“If there is conflict or discrepancy between any provision added to this Agreement…”.
Electronic Signatures
“The parties hereto consent and agree to the use of electronic signatures pursuant to the Electronic Commerce Act, 2000, S.O. 2000, c17 as amended from time to time with respect to this Agreement…”.
Time and Date
“Any reference to a time and date in this Agreement shall mean the time and date where the property is located.”
Successors and Assigns
While this paragraph should be independent and on its own like all the other paragraphs, it actually contains the signature section for the Buyers and then goes on to reference the Sellers.
And it says:
“I, the Undersigned Seller, agree to the above offer.”
Confirmation of Acceptance
“Notwithstanding anything contained herein to the contrary, I confirm this Agreement with all changes both typed and written was finally accepted by all parties ….”.
Acknowledgement
“I acknowledge receipt of my signed copy of this accepted Agreement of Purchase and Sale …”.
Commission Trust Agreement
“To: Co-operating Brokerage shown on the foregoing Agreement of Purchase and Sale:
In consideration for the Co-operating Brokerage procuring the foregoing Agreement of Purchase and Sale ….”.
Schedule “A”
“This Schedule is attached to and forms part of the Agreement of Purchase and Sale between:…”.
“This form must be initialled by all parties to the Agreement of Purchase and Sale.”
COMMENT
While the title to the document itself is Agreement of Purchase and Sale, it doesn’t become an agreement in contract law until it is in fact accepted. Up until then, it was simply an Offer.
So, because the casual references throughout, sometimes to “this agreement” and sometimes to the “offer”, you will appreciate that the document as you see it likely was not drawn up by one person at one time, but rather by a number of people over time.
For Edmund Brown he made references to an offer until acceptance and then it became an agreement. But, his two separate clients needed to have different titles to the same document.
When we use the reference to Agreement, that can become quite misleading when we don’t have a deal for several months.
Brian Madigan LL.B., Broker