I had written a previous blog on the “time is of the essence” clause in real estate agreements where it was discussed that the strict adherence to any agreed upon time limits was generally the case.
A recent Ontario Court of Appeal case, Fortress Carlyle Peter St. Inc. v. Ricki’s Construction and Painting Inc., serves as a reminder that the “time is of the essence” clause is not absolute and unfettered, and there are preconditions that must be satisfied for a party to rely upon and insist on time being of the essence.
The facts are not overly complicated in this case. The respondent was a condominium developer in the process of acquiring properties for a proposed project in downtown Toronto. The developer entered into an Agreement of Purchase and Sale (“APS”) with the vendor to acquire the subject property. Although the APS required the vendor to provide estoppel certificates five days prior to closing, the vendor delivered an altered estoppel certificate on the morning of closing, and only delivered a proper estoppel certificate at close to 5 pm after the developer’s solicitor discovered the alteration and demanded a correct estoppel certificate. As a result of the delay, the closing funds were transferred 16 minutes after the 6 pm deadline, and the vendor took the position that the developer had defaulted on the basis of time being of the essence.
On summary judgment, the motions judge found the vendor had breached the APS and had failed to act in good faith in respect to the estoppel certificate debacle. Under those circumstances, the vendor was no longer entitled to insist on time being of the essence. On appeal by the vendor, the Court of Appeal agreed with the motions judge, stating the following:
For [the vendor] to insist on time being of the essence: (i) it had to have shown itself to be ready, desirous, prompt, and eager to carry out the APS; and (ii) it could not have been the cause of the delay or default in performing the APS.
Therefore, the vendor could not rely upon the time is of the essence clause and take advantage of a situation in which it created, especially when it failed to act honestly in its performance of the APS. The court also found that, even if it was accepted that both parties had breached the agreement, the APS remained alive with time no longer being of the essence but either party may restore time is of the essence by giving reasonable notice to the other party of a new date for performance. The developer had provided notice that the transaction would close the next day, and when the vendor refused to close, the developer was entitled to specific performance.