Can a buyer call something material just to avoid closing?

Buyers and sellers can disagree about whether a problem found before closing is serious enough to excuse the buyer. The word “material” carries weight only if the agreement gives it weight. This page covers Canada generally and cites one Québec rule and one Ontario rule. Other provinces and territories have their own law, and this page does not describe it.

The agreement’s wording comes first

Check whether the agreement defines “material” or uses a related phrase, who decides whether a problem meets it, and what the buyer must do next, such as giving written notice and a period to fix the issue. The Civil Code of Québec says a contract binds the parties not only as to what they expressed in it but also as to what is incident to it according to its nature and in conformity with usage, equity or law. Whatever the province, start with the signed words.

Québec: a minor default does not end the contract

Under the Civil Code, a creditor who does not force specific performance in cases which admit of it is entitled to resolution of the contract, or resiliation of a contract of successive performance. Notwithstanding any stipulation to the contrary, the creditor is not entitled to resolution or resiliation if the debtor’s default is of minor importance, unless, in an obligation of successive performance, the default occurs repeatedly; the creditor is then entitled to a proportional reduction of its own correlative obligation. The Code also lets a party refuse its own performance to a corresponding degree when the obligations are exigible and the other party fails to perform to a substantial degree or does not offer to perform, unless the first party is bound to perform first. Those words set a measure that the buyer’s claim has to meet.

Good faith and forfeited deposits

The Civil Code requires the parties to conduct themselves in good faith when an obligation arises and when it is performed or extinguished. A buyer who invents a reason to avoid closing is open to that argument. In Ontario, the Courts of Justice Act lets a court grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just. Whether a particular deposit clause falls within that provision is a question for a lawyer.

What to do if a buyer raises the point

Ask for the problem in writing, with the clause the buyer relies on and the evidence. Compare it with your disclosure schedule. Keep your own record of what you disclosed and when. Do not respond with threats before a lawyer has read the agreement. The Barreau du Québec says lawyers advise on the legal aspects of everyday life and assist in drafting legal documents. Do I need a lawyer to buy a business covers the buyer’s side of that question.