When you purchase real estate in Ontario, there are typically conditions imposed by one or both parties on the other. These “condition precedents” need to be waived or fulfilled in order for the agreement of purchase and sale (“APS”) to become unconditional. Typical examples of conditions included for the sole benefit of the buyer in residential transactions are financing and inspection conditions.
Parties, normally through their real estate agents, negotiate throughout the course of the real estate transaction from the inception of the deal at the offer stage up until the acceptance of the offer and signing of the APS (including any amendments thereafter). However, there are pre-printed clauses in the standard Ontario Real Estate Association (“OREA”) APS form, one of which is known as the “entire agreement” clause (“EA Clause”).
With an EA Clause, when one party, let’s say the buyer, later alleges that the other party, the seller, (i) made representations during negotiations that were not included in the written words of the APS, (ii) the buyer wants to back out of the transaction because of (i), and (iii) the APS has become unconditional because the buyer waived all conditions, the buyer, in short, is out of luck.
Assuming there is no fraud involved or other legal bases which could give rise to the remedy of rescinding the APS, when an APS becomes unconditional, there is no more legal recourse for the parties to back out of the transaction. An APS that is breached has severe consequences, as dealt with in our article entitled “Getting Real About Breach of Real Estate Agreements in Ontario”.
An EA Clause generally presupposes that all conditions, representations, warranties, agreements, and the like that were made during negotiations have been contemplated and written into the APS. If a party desired to include specific protections for representations made during negotiations, those protections should form part of the written words of the APS. An EA Clause applies retroactively in that regard as it generally precludes liability for negligent misrepresentation if the representation was made prior to signing the APS and was not included in the written words of the APS.
However, an EA Clause does not apply prospectively to representations made after signing the APS. If an EA Clause is to apply prospectively to exclude the inclusion of any representations made after signing the APS, the EA Clause must expressly state so. Otherwise, absent an amendment in writing, the original terms of the APS govern.
How does the waiver document become relevant? A waiver is a document that signifies a party’s intention to waive or abandon their rights, such as the right to obtain sufficient financing before completing the transaction. The legal effect of a waiver properly delivered is to “waive” farewell to those rights. In the face of an EA Clause, once a right has been waived it is gone and only the remaining terms of the APS govern because there would be no other conditions, representations, warranties, agreements, or the like that still exist outside of the written words of the APS to affect the parties’ rights under the APS.
