Getting Around “Good Faith” in Ontario

Question:

The standard clauses for financing and inspection which say “absolute and unfettered discretion” are no longer the case. How do you get around that?

Answer:

There is no obligation to “negotiate” in good faith, but once you have a contract, you are obligated to “perform” in good faith.

In the Bhasin case, the test went from subjective to objective. So, the way to get around Bhasin is to include a subjective test. That’s not the way that the OREA clause is worded, so in this case, there’s no free walk away.

So you would add the words:

“…in his sole and absolute discretion, to be determined in accordance with a subjective test….”.

That’s the bare minimum. You could add more information etc. for clarity, like:

“….notwithstanding that this agreement may simply constitute an option to purchase in favour of the Buyer….”.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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