Notice of Fulfillment or Waiver (The “Debate”)

A question that seems to arise frequently is the use of the Waiver and the Notice of Fulfillment (NOF). When do you use one? And, when do you use the other?

You need to use an NOF for a True Condition Precedent. That’s the reason it was drafted up in the first place.

You should be aware of the background. There are three types of conditions:

  1. Conditions Precedent,
  2. Conditions Subsequent, and
  3. True Conditions Precedent.

The NOF is the REQUIRED document for a True Condition Precedent. That was the reason why it was drafted so that it would be suitable for use in this situation. It is a single signature document, but a double signature document, namely, the Amendment would work here too.

A Condition Subsequent does not need any document whatsoever to firm up the deal, but people still use both Waivers and NOF’s. How crazy is that? A no meaning document just to be on the “safe side”. But, actually it looks like the person doesn’t really know what to do, and this is the dead giveaway that we have someone who is puzzled.

A True Condition is one which requires a person who is not party to the contract (independent third party) to act or refrain from acting. Severance or mortgage assumption are two examples. The Seller and the Buyer cannot compel the Municipality to grant a severance. Similarly, they can’t compel the Bank to loan money by way of a mortgage assumption in favour of the Buyer. It really can’t be waived. So, that’s why we have the NOF Form.

A regular Condition Precedent allows two choices: 1) NOF and 2) Waiver. I didn’t make this up; it’s right there in the clause. And, there are no rules governing your selection. Choose either one, and you will be right. You will have made the deal “unconditional”. It was already “firm and binding” when it was accepted in the first place. No one is going to jail for selecting the wrong form. Both choices are correct. There is no RECO discipline case on this, and there is no decision of the Ontario Court of Appeal on this.

Double Waiver Document

In the past, a Double Waiver was used for True Conditions. Both parties would sign it, but, of course, it really wasn’t quite right, but there weren’t that many Forms. In fact, it was truly an amendment written upon a Waiver Form.

The Need for the NOF Form

Historically, this goes back to the 1957 decision of the Supreme Court of Canada in Turney v. Zhilka. That is the case where the Court identified the True Condition Precedent and confirmed that one party simply couldn’t waive it.

I suppose life was somewhat slower in those days. It took several years before the NOF Form actually took a foothold. The earliest one I found was in 1969 and it was contained in a real estate course.

Legal Stationers

Back in the day before computers, there were simply typewriters. The legal stationers were Dye & Durham and Newsome and Gilbert. They each produced agreements dealing with the acquisition of land on legal length paper, 6 copies per set, separated by carbon paper. It was only the top copy which was really ever signed.

Dye & Durham produced the “Offer to Purchase”, and Newsome and Gilbert published the “Agreement of Purchase and Sale”. The wording contained in each document was extremely similar, with just slight differences.

No one seemed to jump on the idea of producing an NOF. There were already Waivers.

The legal stationers would sell packages of forms enclosed in cellophane. The Offers and Agreements were popular, as were the Waivers, but it seemed very difficult to sell a package of 100 NOF Forms. So, they weren’t particularly plentiful. One change to any of the forms that had been purchased and the balance of unused documents would be thrown out.

So, what did people do?

They used the Waiver Form. It still said “Waiver” at the top of the page, but then they would write in “condition fulfilled”, “condition satisfied” or “condition completed”. Often they would add the words: “this deal is now firm and binding”. Needless to say, that comment was superfluous and unnecessary but it was an indication that they were ready to move to the next step, namely the completion of the transaction.

O’Brien’s Forms

As time went by, high speed typewriters with mag cards were replaced by computers. O’Brien’s Forms were in common usage. Lawyers purchased copies of the templates and had access to the Forms. It was at this point that the NOF Form appeared in the real estate conveyancing section.

Although the same issue would apply in other commercial transactions, the NOF Form never seemed to make its way over there. This is also the case with many legal jurisdictions other than Ontario, where is no NOF Form at all. They just use Waivers. Some get the Waiver signed by the parties for True Conditions. But, that’s really an Amendment.

Ontario and the NOF Form

This document really didn’t become popular until the mid 1980’s. It was necessary for True Conditions, but it would also work with a regular Condition Precedent, if you wanted to use it. A rumour spread at the turn of the century about an “explanation” without any foundation in law or logic.

The explanation:

Waiver: if you didn’t do it.

NOF: if you did do it.

That explanation still remains popular today. It’s never going to be tested in Court because there’s no difference in the consequences associated with the use of the two forms.

Selection of Forms

Consider a financing condition. Bob calls the Bank and gets some quotes. The Bank wants to offer Bob a mortgage, but Bob says he’s just shopping around. The Bank confirms the rates by email. Bob talks to another bank about their rates. The same situation “quotes by email”. Bill, Bob’s agent asks whether Bob has a mortgage. Bob says “yes”. Now, the critical question: “what Form does Bill use”?

The deal becomes unconditional once either the Waiver or the NOF are sent along to the Listing Agent.

Then, Bob decides to apply for a mortgage at Bank A.  He receives a “conditional approval”. So, this is not a commitment, it’s just a conditional approval and it is conditional upon:

  • Proof of income
  • Verification of employment
  • Credit check
  • Appraisal of the property
  • Review by underwriting department

So, when did we actually pass the threshold where we can say that the Condition in the Agreement of Purchase and Sale was truly fulfilled?

The confirmation of mortgage approval is forwarded to the solicitor handling the closing. If Bob dies, is injured, loses his job, buys a car or is sued by someone, then the Bank can pull the plug and send the file back to Underwriting for approval.

It’s important to realize that what appeared to be a deal with the Bank had a lot of loopholes. The point here is that there are many points along the road to completion. In fact, it’s really never a “done deal”, until it’s closed.

Let’s also look at another common condition, the home inspection. The Inspector completes a review and assessment of the house. It has a number of deficiencies. Bob’s happy! So, he could sign an NOF.

The report indicates a series of serious deficiencies. Bob’s not happy! He wants them fixed. But, pressed to the wall, he will still take the house, but he’s not at all pleased with the condition of the building and he makes that known to everyone.

Bob relies upon the fact that the contract provides some statements, representations, and terms concerning the condition of the property. He will close. He might sue afterwards and he doesn’t want to say that this condition was “fulfilled”. He much prefers the use of the Waiver. It would work in the same way. He does not wish later in the litigation proceedings to being confronted with the admission that he “approved or was satisfied with” the condition of the property as indicated in the report. After all, he did sign an “NOF” and isn’t that what it means? Who knows!

Does the NOF at any stage mean that Bob got the mortgage approval? If so, at what stage?

Did the use of the Waiver in respect to the financing condition mean that Bob did not get the mortgage?

They could both, of course, mean the same thing!

What about the home inspection? Did the NOF mean Bob was satisfied and happy with the report? Would the use of the Waiver mean that the inspection never took place? Could the use of a Waiver mean that Bob did the inspection but was not all that happy with the condition of the building?

Considering the NOF, you will appreciate that maybe it just means: “I have fulfilled this condition since I have decided not to proceed with the inspection at all…”. Thus, it may not even mean that the inspection took place.

If you are going to Court and you need to prove the physical condition of some item or you need to prove that a home inspection actually took place, then this is simple: just call the Inspector as a witness! What could be easier than that?

Dealing with an argument over the possible, likely, and suggested meanings that flow from these two forms is foolhardy.

My point here is simply that there is no extra meaning that goes with these Forms. You can never, evcr be sure that all the extra ideas, thoughts, considerations, and conclusions that you associate with the use of one Form or another really ever crossed Bob’s mind. And, that’s what counts in a lawsuit.

Your ideas are interesting I’m sure, but not particularly relevant.

If you want any particular extra meaning to be in the contract, you will have to insert an appropriate clause to that effect. You can’t just think about it, you have to write it down. It’s not contained in the contract it cannot be implied from the use of one of the Forms.

Consequences of the Use of the Waiver and NOF

For a True Condition Precedent you require an NOF. A Waiver is meaningless. The Agreement has become “null and void”.

For a Condition Subsequent, no documentation is required at all. Upon expiration of the time, the Agreement is automatically “unconditional”, and to use common but unnecessary verbiage it is “firm and binding”.

For a general Condition Precedent, you require either a Waiver or NOF. If either are received within the time period, the Agreement becomes “unconditional”.

Choices available

For the general Condition Precedent, there are two choices:

1) Waiver, and

2) NOF.

Those choices are available to the Buyer, and likely will be generated by the Buyers’ real estate agent. Between them, THEY will choose. No one else gets to choose, except perhaps the Buyer’s lawyer.

Receipt of the Waiver or NOF

If the Seller receives the Waiver or NOF, or the Listing Agent on behalf of the Seller receives the Waiver or NOF within the designated time frame, the transaction has become “unconditional” and proceeds towards completion.

It may be possible to say that one or other of the documents was not received “in time”. That would indeed be a problem. If you received a Waiver and you would have preferred an NOF, the later receipt of the NOF either within the time frame or after the time frame is meaningless. The deal was already “unconditional”. Saying it twice doesn’t have any legal consequence.

Refusing to Accept the Waiver or NOF

Now, here’s the problem. A number of agents say: “

I wouldn’t accept that”… “It’s on the wrong form”…. “don’t accept it”….”just send it back”….. “that agent doesn’t know what he’s doing”.

This is not a good option.

If you are the Listing Agent, neither you, nor your client, the Seller, have the right to choose. Go back, have a second look at the clause: it said either the Waiver or the NOF, and you received one of them. The issue is now over. Let it go!

The Ultimate Consequence of Refusal, Rejection or Return

Should you refuse, reject or return the document whatever it may be, your next step should be to call your insurer since you are likely to be sued for negligence.

Brian Madigan LL.B., Broker

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