Understanding “Absolute Discretion” in Ontario


What does absolute discretion for a Buyer really mean? Can a Buyer walk away from a deal over a GFI plug?


How do you deal with the issue of “absolute discretion? It used to be assessed on a subjective basis and now it will be determined on an objective basis. So, Bob the Buyer has this clause and suddenly changes his mind. He points to the GFI and says “that’s enough for me”.

On a subjective basis, we just look to Bob.

But, on an objective basis we have a slightly different question: “what would a reasonable person in Bob’s position do in all of the circumstances?”

It’s here, that we would ordinarily conclude: “one GFI on a million dollar property, that doesn’t make sense!”

The new test in Ontario has been objective since 14 November 2014. Subsequently, there have been two other Supreme Court of Canada decisions expanding upon this “good faith obligation to complete” the contract.

Brian Madigan LL.B., Broker


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