What is a valid agreement?
On the chat widget, I received the following question about what is a valid agreement:
I am currently leasing an apartment in Toronto and my landlord offered me to buy the place privately.
After some emails back-and-forth on the valuation, I accepted to pay her offered price under the condition that she could let me review the minutes of the last few annual co-owners meetings and financial statements and perhaps arrange a meeting with the head of maintenance.
She refused and completely changed her tone: she said I was being “a pain in the ass” and that she would rather hire an agent and sell in the open market at a lower price rather than to sell to me.
This week the agent scheduled over 50 visits and today the owner provided me with an eviction notice.
Question: does my conditional approval of her offered price under a private sale have any precedent over her attempt now to sell to a third party?
Should I get a lawyer?
I’ll answer the second question first.
When it comes to the law, you should always consult with a lawyer. I’m not a lawyer. With residential real estate, most Agreements of Purchase and Sale are done on OREA forms with standard clauses (or on builder forms with different standard clauses). This means essentially that Realtors understand the fundamentals of law but are not experts.
I don’t know if lawyers love or hate private buyers and sellers, but I avoid them like I would avoid the plague, or Vikings, or early morning meetings.
That said, the law is really interesting. There is a reason for all of the books and TV shows and movies about the law. The law is interesting. It is a fundamental part of our society.
I will answer the first question now.
The question that JF (aka pain in the ass) is asking is does he or she have a valid contract to buy the place? Or, put another way, does JF and his/her landlord have a legal contract.
What are the essential elements of a contract?
An agreement must have the following essential elements to become a valid contract:
- Offer and acceptance.
- Mutual consent of parties.
- Intention to create legal obligation.
- Free consent of parties.
- Parties must be competent to contract.
- Lawful object.
- Lawful consideration.
Without going into too much detail, it is clear to me that no valid contract exists. This contract does not have an offer that was accepted – it broke down in the negotiation phase of the offer. JFs conditional offer to buy the place was rejected outright. That is pretty clear. Here’s a couple of things to think about:
- Conditions were not met: JF was “perhaps” going to meet with the head of maintenance. That is pretty unclear. Contracts have to be clear. We need the who, what, where, when, why of this condition. What was the purpose of this meeting? What was going to happen after this meeting? Details.
- Intentions to create a legal obligation were not met: She called you a “pain in the ass” and said she would rather sell it so someone else at a lower price. Her intention is pretty clear.
There are lots of websites that explain the law. According to this website: Courts distinguish preliminary negotiations from formal legal offers in that parties to preliminary negotiations lack a present intent to form a contract. Accordingly, no contract is formed when parties to preliminary negotiations respond to each other’s invitations, requests, and intimations.
Finally, it is unknown from the message whether or not JF and his landlord put anything down on paper, had any time constraints or if any deposit money changed hands. I suppose you can still have an implied agreement without them but whether or not an agreement like that would stand up in court is more than a little dubious to me. In my world, residential real estate contracts are always written down with times and dates and deposits are always received and held in trust.
Further Reading: What do real estate lawyers charge?