Canada: Enforcing Oral Agreements For Dealings In Land

Oral Agreements for Dealings with Land

According to the Statute of Frauds,¹ a contract regarding the use of land must be in writing. This includes agreements for the purchase, sale, lease, etc. of land. What happens when you want to enforce an oral agreement concerning land that is not in writing? According to the Ontario Court of Appeal ("ONCA") in Erie Sand and Gravel Limited v. Tri-B Acres Inc., 2009 ONCA 709 ("Erie Sand"), an oral agreement to deal with land may be upheld by the Court if a party is able to demonstrate that the conduct of the parties shows that the contract existed. This is called the doctrine of part performance.²

Erie Sand and Part Performance

In Erie Sand, the plaintiff and the defendant orally agreed to the purchase and sale of land ("the Agreement") which included the acreage to be sold, the price per acre and the closing date. There was a third party with a right of first refusal, which made the Agreement contingent on the third party not matching the plaintiff's offer. The defendant asked the plaintiff for a written document that reduced the oral agreement to writing but this was never signed. The defendant then accepted a less offer from the third party. The plaintiff started a lawsuit to enforce the Agreement.

The trial judge determined that the parties acted in part performance of the oral agreement, which took the agreement outside of the Statute of Frauds. These actions include:

• the plaintiff prepared the offer and delivered it to the defendant;
• the offer reflected the material terms, the parties, the property and the price;
• the plaintiff delivered a certified cheque for the full purchase price, together with the offer;
• the plaintiff knew and expected that delivery of the offer would trigger the third party's right of first refusal;
• the defendant delivered the offer to the third party; and,
• the third-party offer was a virtual mirror image of the offer, subject only to the differences in the amount of the deposit and the closing date.

The ONCA dismissed the defendant's appeal and the trial judge's decision was upheld.

Conclusion

If you have an oral agreement dealing with land which is not in writing, you may still be able to enforce the agreement if you can show that there was part performance of the contract. If you wish to enforce an oral agreement, an agreement in land or a contract generally, contact the real estate dispute lawyers and contract dispute lawyers at Walker Law.

Footnotes

1. Statute of Frauds, R.S.O. 1990, c. S. 19, section 4

2. Erie Sand and Gravel Limited v. Tri-B Acres Inc., 2009 ONCA 709