Buyer Defaults, but Seller is Cautious

Entering into a Settlement Agreement | Disinherited

The Buyer is about to default on the deal. The Seller will let them out of the deal and give them their deposit back as long as deal #2 closes with Buyer #2.

There is one stipulation and that is, if the Seller gets sued for commission on the first deal, then the Buyer has to pay it.

Here’s what an Agreement along those lines might look like:

Settlement Agreement


THE Sellers


THE Buyer


The Buyer agreed to purchase 123 Main Street, Toronto from the Sellers pursuant to an Agreement dated 21 April 20xx to close on 31 August 20xx,

And Whereas the Buyer did not complete the purchase as agreed,

And Whereas Buyer 2 has agreed to submit an Offer to purchase the property to close on 30 November 20xx,

NOW THEREFORE in consideration of the premises, the sum of two dollars ($2.00), the mutual promises exchanged hereafter, the introductions and such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

  1. Settlement: The parties agree to settle their outstanding issues in accordance with the terms of this settlement agreement.
  2. Compensation: No amount of compensation shall be paid or exchanged as between the parties.
  3. Condition: It is a condition of this settlement agreement that the transaction with Buyer 2 shall be successfully completed.
  4. Mutual Release: The parties shall execute a Mutual Release drawn upon the standard Form OREA document, a copy of which is attached as Schedule “A” no later than fourteen (14) days following the date of successful completion of the purchase of the property by Buyer 2.
  5. Deposit Return: The Mutual Release shall provide that the deposit in the amount of $30,000.00 together with any accrued interest thereon shall be returned to the Buyer, forthwith.
  6. Outstanding Liability: The parties acknowledge that the Listing Agent, namely ABC Realty Inc. may charge a commission to the Sellers arising out of the Listing Agreement by reason of the execution of the Agreement dated 21 April 20xx.
  7. Indemnification: The Buyer agrees to indemnify and save harmless the Sellers of and from any and all commissions, costs, charges, fees, assessments, and expenses arising whatsoever in connection with the sale of the property from  ABC Realty Inc. as a result of the Listing of the property and the Agreement of Purchase and Sale dated 21 April 20xx.
  8. Defence of Claims: The Buyer shall have the opportunity to defend any claim pursued by ABC Realty Inc. as against the Sellers, in the name of the Sellers at his own expense. The Sellers shall be entitled to participate in the selection of legal counsel and shall cooperate in the defence of any such action as may be brought against them
  9. Time: Time is of the essence in this agreement.
  10. Entire Agreement: This agreement including any schedule(s) hereto shall constitute the entire agreement between the parties, and there is no representation, warranty, collateral agreement or condition that affects this agreement other than as expressed herein.
  11. Applicable Laws: The legal jurisdiction selected by the parties for interpretation of the terms of this agreement is the Province of Ontario.
  12. Assignment. This agreement shall not be assigned by either party without consent of the other party.
  13. Addresses for Service. The addresses for service of notices and documents shall be as follows:

The Sellers

96 Avenue Boulevard

Toronto, Ontario

M9M 9N9

The Buyer

100 Main Street

Toronto, Ontario

M1M 1N1

14. Binding Agreement: This agreement shall enure and be of benefit to the parties hereto, their respective heirs, successors and assigns. 

This agreement executed at Toronto, Ontario this_________ day of  October, 20xx.




                                                                   Seller 1


                                                                   Seller 2



Brian Madigan LL.B., Broker

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