Société en commandite Place Mullins and 139612 Canada inc. v. Services immobiliers Diane Bisson inc.(Contracts — Brokerage contract — Commission)

The appeal from the judgment of the Court of Appeal of Quebec (Montréal), 2013 QCCA 868, was heard on March 18, 2015 and the Court on that day allowed the appeal orally, with reasons to follow. Today, the Court deposited reasons allowing the appeal with costs throughout, except for the costs awarded against the appellants on the motion to extend time in this Court.

The promisor‑sellers signed an exclusive brokerage contract — drawn up using a standard form of the Association des courtiers et agents immobiliers du Québec — under which they gave a brokerage enterprise a mandate to sell their immovable. The contract stipulated that the promisor‑sellers’ obligation to pay the brokerage enterprise’s commission would be triggered, inter alia, where an “agreement to sell the immovable” was concluded during the term of the contract, or if “the seller voluntarily prevents the free performance of the contract”. The promisor‑sellers initially accepted a promise to purchase obtained by the brokerage enterprise. This promise to purchase gave the promisor‑buyer a right to withdraw the promise if he was not completely satisfied with the results of his due diligence on the immovable. After it was discovered that the immovable might be affected by environmental contamination, the promisor‑buyer reiterated to the promisor‑sellers that he intended to buy the immovable, but on condition that they decontaminate it at their own expense. The promisor‑sellers refused, and the sale of the immovable never went through. The brokerage enterprise claimed from the promisor‑sellers the commission amount set out in the brokerage contract, but the Superior Court dismissed the action. The Court of Appeal set aside that judgment in a split decision and allowed the appeal.

Held (7:0): The appeal should be allowed.

In principle, where a contract contains a resolutory condition, the obligations for which the contract provides nevertheless arise and are exigible, as if they were pure and simple, as soon as it is signed. Thus, even though a promise to purchase can be resolved, it is binding on the parties as soon as it is concluded. But so long as a promise to purchase is not unconditionally binding on the promisor‑buyer and the promisor‑seller and it is not yet possible for one of them to bring an action to compel transfer of title, there is no “agreement to sell the immovable” within the meaning of the brokerage contract. In this case, because the environmental assessment had shown that the soil was contaminated and because the promisor‑buyer had clearly expressed his intention not to conclude a sale until such time as the property had been decontaminated at the promisor‑sellers’ expense, the promisor‑buyer had repudiated the initial promise and submitted a new offer to purchase. The initial promise to purchase never became unconditional, and the promisor‑buyer’s new offer was never accepted. This means that no agreement to sell the immovable was concluded, and the brokerage enterprise was not entitled to be paid its commission.

Nor was the obligation to pay the commission triggered by the promisor‑sellers’ voluntarily preventing the free performance of the brokerage contract. Under the promise to purchase, the promisor‑sellers did not have an obligation either to decontaminate their property or to renegotiate the terms of the initial promise to purchase. Given that they had not known about the contamination when the brokerage contract was entered into, it cannot be concluded that they wrongfully prevented the completion of the sale. Although the brokerage contract contained a declaration by the promisor‑sellers that the immovable was in accordance with environmental protection laws and regulations, the declarations set out in the brokerage contract cannot on their own, absent proof of bad faith, serve as a basis for arguing that the promisor‑sellers voluntarily prevented the free performance of the contract. Furthermore, those declarations are not warranties and the legal warranties could not apply, because no sale had been concluded. Under art. 1396 of the Civil Code of Québec, an accepted promise to purchase is not equivalent to a sale and does not produce any of the effects of a sale. In sum, the promisor‑sellers committed no fault in relation to their obligations under either the promise to purchase or the brokerage contract.

English version of the judgment of the Court delivered by Wagner J.

Neutral Citation: 2015 SCC 36. Docket No. 35461