The Supreme Court of Canada made some changes to the common law of contracts. These new changes will afford an opportunity to the real estate industry to increase their degree of professionalism.
I’m talking about the law of disclosure. It’s different for vendors and agents. For vendors, it’s based on latent defects and for agents, it’s based on material facts.
The standard is higher for material facts. So, why not have the vendor agree to disclose material facts rather than just latent defects? That would increase the level of disclosure, align the interests of the vendor and their agent as well as avoiding future lawsuits. This could make everyone happy except the lawyers! OK, that’s “unfair”. The vast majority of lawyers would encourage less litigation.
The new arrangement would be to have the vendor disclose to their own agent those facts which would be considered material to a real estate transaction.
It would be helpful for an agent to be armed with a checklist or a list of standard items that should be canvassed. The difference now, with the new rules is that the vendor would have a duty of good faith and honesty when offering responses.
All common law contracts include:
1) an obligation of good faith contractual performance, and
2) a duty to act honestly in the performance of contractual obligations.
This means that the answers will be fair, reasonable and reliable. It is also important to note that no answer at all, is still a good response.
Going forward, all we really need would be a good checklist dealing with material facts.
Then, all that’s necessary is to negotiate a fair contract with knowledge of those facts. Naturally, it’s important to ensure that the agreement is fairly worded; one-sided contracts are rarely appropriate. Clarity, knowledge and informed consent of both parties makes the most sense.
In reality, this is probably years away!
Brian Madigan LL.B., Broker