Clause Survival

Septic system that works

Question:

I want to make sure that the septic works on closing. The Listing agent is striking out “survive and not merge”.

I was always under the impression that “survive and not merge” was to parachute that representation or warranty beyond closing as when there is a closing, the contract is finished. It dies you might say. How do you sue an owner if those items are not in working order at closing if that clause does not survive closing? I’m curious as that’s what I always believed. 

Answer:

The issue you are referring to is the doctrine of merger: the provisions in an executor contract will merge into the conveyance and the closing documents.

Whether a provision merges is one of intention which could either be express or implied. The Court interprets the contract to determine whether or not it was the mutual intention of the parties that the provision would survive.

If it is express, namely, a clause would include the words “survive and not merge”, then, that’s pretty clear.

Otherwise, a Court has to make an assessment and draw its own conclusion.

If the Buyer includes “the chattels and fixtures will be in good working order on closing”, then that’s all they need. The septic is a fixture and it must be in good working order on closing. We don’t need to extend the provision. The fact of the matter would be either that it worked or didn’t work at that time. The doctrine of merger is not relevant here.

Now, if we want a 30 day warranty after closing, we would have to add that to the contract. The next determination is whether the parties intended that provision to extend beyond the closing. We could leave it and it should be evident that that was the intention or we could make sure that there was no possibility of confusion by adding “survive and not merge”. Then, we have it for sure.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com