Shiralian v. Wyldewood Creek Inc., 2026 ONCA 163
Right now, there are a good number of Sellers who are “underwater” or very close to it, and are trying to sell their properties.
While it looks like there is just enough money to buy everyone out, by the time you add in municipal taxes, penalties on mortgages, additional interest, executions, CRA entitlements, real estate agents commissions and other factors that weren’t considered, the transaction may not proceed.
Whose fault is that?
Does the Listing Brokerage owe the co-operating commission even on a defaulted sale? After all, they were the ones who didn’t do the math!
Let’s look at a few clauses that could be included. The Ontario Court of Appeal just ruled in favour of the clause being successful in a pre-construction deal (Shiralian v. Wyldewood Creek Inc.) so, surely it should work in a regular real estate transaction.
Some examples:
- Limitation of Liability Seller
“Notwithstanding any other provision of this Agreement, in the event that the Seller is unable or unwilling to complete the transaction contemplated by this Agreement for any reason other than fraud or wilful misconduct, the Buyer agrees that the Buyer’s sole and exclusive remedy against the Seller shall be limited to the return of the Buyer’s deposit paid under this Agreement together with any interest earned thereon, and upon such repayment this Agreement shall be terminated and neither party shall have any further rights, claims, or remedies against the other arising out of this Agreement.
The Buyer acknowledges and agrees that the Seller shall not be liable to the Buyer for any further damages, costs, expenses, or losses whatsoever, including but not limited to loss of bargain, expectation damages, consequential damages, or special damages arising from the Seller’s failure to complete the transaction.
This limitation of liability shall survive the termination of this Agreement.”
2. Expanded Limitation Clause (Developers)
“Except in the case of fraud or deliberate misrepresentation by the Seller, the Buyer agrees that the Seller’s liability for any breach, default, or failure to complete this Agreement shall be strictly limited to the return of the Buyer’s deposit together with interest thereon, and the Buyer expressly waives any claim to specific performance, damages for loss of bargain, or any other remedy at law or in equity.”
3. Seller Default Clause
“In the event the Seller fails to complete the transaction for any reason other than fraud or wilful misconduct, the Buyer’s remedy shall be limited to the return of the deposit together with interest thereon, failing which the Buyer may pursue damages.”
4. Ultra-Aggressive Developer-Style Clause
(Strongest protection for the Seller but hardest for Buyers to accept)
Seller’s Limitation of Liability
“Notwithstanding any other provision of this Agreement, in the event that the Seller fails, refuses, or is unable to complete the transaction contemplated by this Agreement for any reason whatsoever other than fraud or wilful misrepresentation, the Buyer’s sole and exclusive remedy shall be limited to the return of the Buyer’s deposit paid pursuant to this Agreement together with any interest earned thereon.
Upon repayment of the deposit and interest, this Agreement shall be terminated and the Buyer hereby releases and forever discharges the Seller from any and all claims, demands, damages, actions, causes of action, costs or expenses of any nature whatsoever arising from or related to this Agreement or the failure to complete the transaction, including but not limited to claims for specific performance, loss of bargain, expectation damages, consequential damages, or special damages.
The Buyer acknowledges that this clause constitutes a complete allocation of risk between the parties and agrees that the Seller shall have no further liability whatsoever upon repayment of the deposit and interest.”
5. Moderate Clause (More Likely to Survive Court Scrutiny)
This version attempts to preserve freedom of contract while avoiding the appearance of harshness.
Seller Default – Limited Remedy
“If the Seller fails to complete this Agreement for any reason other than fraud or intentional misrepresentation, the Buyer agrees that the Buyer’s remedy shall be limited to the return of the Buyer’s deposit together with any interest earned thereon.
Upon repayment of the deposit and interest, this Agreement shall be deemed terminated and the Seller shall have no further liability to the Buyer arising from the failure to complete this transaction.
The Buyer acknowledges that the parties have agreed to limit damages in this manner and that the return of the deposit and interest represents fair compensation in the circumstances.”
6. Practical “Deal-Friendly” Clause
(Often used by cautious lawyers because it is less likely to derail a transaction)
Instead of fully eliminating damages, this clause creates a first remedy but not an absolute cap.
Seller Default
“If the Seller fails to complete this transaction in accordance with this Agreement, the Buyer shall be entitled to the return of the deposit together with interest thereon forthwith.
If the deposit and interest are returned within five (5) business days following written demand by the Buyer, the Buyer agrees that this shall constitute full settlement of the Buyer’s claims arising from the Seller’s failure to complete this Agreement.
If the deposit and interest are not returned within that time, the Buyer shall retain all rights and remedies available at law.”
7, Mutual Limitation of Liability Clause (Residential APS)
“The Buyer and the Seller acknowledge and agree that this Agreement constitutes a negotiated allocation of risk between the parties.
In the event that either the Buyer or the Seller fails or refuses to complete the transaction contemplated by this Agreement for any reason other than fraud or wilful misrepresentation, the non-defaulting party’s sole and exclusive remedy shall be limited to the following:
(a) if the Buyer is in default, the Seller shall be entitled to retain the deposit paid under this Agreement together with any interest earned thereon as liquidated damages; and
(b) if the Seller is in default, the Buyer shall be entitled to the return of the deposit paid under this Agreement together with any interest earned thereon.
Upon payment or retention of the deposit in accordance with this clause, the parties agree that the matter shall be at an end and neither party shall have any further rights, claims, damages, or remedies against the other arising from the failure to complete this transaction, including but not limited to claims for specific performance, loss of bargain, consequential damages, or special damages.
The parties acknowledge that the deposit represents a genuine pre-estimate of damages and that this clause constitutes a fair and reasonable allocation of risk between them.”
8. Mutual Limitation of Liability and Liquidated Damages
“The Buyer and the Seller acknowledge and agree that this Agreement represents a negotiated allocation of risk between them and that the remedies set out in this clause are intended to constitute the sole and exclusive remedies available to either party in the event that the transaction contemplated by this Agreement fails to complete due to the default of the other party.
In the event that the Buyer fails or refuses to complete this transaction in accordance with the terms of this Agreement, the Seller shall be entitled to retain the deposit paid under this Agreement, together with any interest earned thereon, as liquidated damages and not as a penalty.
In the event that the Seller fails or refuses to complete this transaction in accordance with the terms of this Agreement, the Buyer shall be entitled to the return of the deposit paid under this Agreement, together with any interest earned thereon.
Upon the payment or retention of the deposit in accordance with this clause, the parties agree that the matter shall be at an end and that neither party shall have any further claims, rights, or remedies against the other arising from the failure to complete this Agreement, whether at law or in equity, including but not limited to claims for specific performance, loss of bargain, expectation damages, consequential damages, or special damages.
The parties further acknowledge and agree that:
(a) the amount of the deposit represents a genuine pre-estimate of damages that would be suffered in the event of a failure to complete this transaction;
(b) the parties have each had the opportunity to obtain independent legal advice with respect to this Agreement and the terms of this clause; and
(c) this clause constitutes a fair and reasonable allocation of risk between the parties.
This clause shall survive the termination or non-completion of this Agreement.”
COMMENT
Now that you have seen some clauses, what would work best for your client? Consider the different approaches. If you make it quite clear from the outset that this clause is to be in place, and that the Seller will do their best to get everyone to sign off, then you should be fine.
If you simply slip it into Schedule B, and try to “bury it” in the fine print, you might have a problem.
Brian Madigan LL.B., Broker