Court Cases & Orders

Appeal Court Rejects Oral Contract Involving $100K “Family Discount”

daughter talking on phone making verbal contract
Written by Russell Alexander / (905) 655-6335

The Validity Behind Common Legal Phrases

A while ago we reported on the unsuccessful $500,000 civil lawsuit brought against Lady Gaga by one of the culprits who kidnapped her beloved dogs.

The judge threw out the dog-napper’s case because – in light of her own culpable role in the abduction – she could not rightly collect on the no-strings-attached reward Lady Gaga had offered for the pets’ return.  The dog-napper was coming to court with “unclean hands,” so she was ineligible to profit from it.

This “unclean hands doctrine” is one of many long-established legal principles and maxims, some of which have crept into everyday parlance.

Yet not every legal-sounding phrase turns out to be accurate.

A good example is the common saying: “A verbal contract isn’t worth the paper it’s written on”, which according to dates back to at least the late 1800s.

Are Verbal Agreements Enforceable in Canada?

Ideally of course, a contract should be in writing – that’s always the best-case scenario.  But some verbal agreements might actually be enforceable under Canadian law.  It depends on whether there are certain legally-required elements in place.

Using a two-party scenario as an example, all of the following must be established:

  • One of the parties has made an offer to the other;
  • The other party has accepted the offer;
  • There has been “consideration” (which in law means an exchange of something of value by both of them);
  • They both have the legal capacity to enter into the contract.

Also, there are two additional requirements that pertain to the nature and scope of the oral contract itself:

  • The contract’s purpose cannot be illegal; and
  • There must be certainty as to its terms.

This last item is where an oral contract gives rise to the biggest problems. While a written contract is the easiest to scrutinize and decipher, an oral contract’s terms can be subject to differing recollections, subjective interpretations, and second-guessing after-the-fact. This often leads to disputes, with the evidence becoming a matter of “he said/she said”.

This was the precise scenario in an Ontario Court of Appeal decision in Downey v. Arey, which involved an alleged real estate deal between a parent and an adult child.

Ontario Court of Appeal Case Highlights the Importance of Clarity in Oral Contracts

The father owned what had been the family home.  He verbally agreed to sell it to his daughter and her partner for $850,000, with a closing date of August 31, 2016.  Although everyone agreed to these basic facts, they differed on whether the father had also verbally promised a $100,000 “family discount” on the purchase price.

The father claimed the $100,000 discount had already been factored into the $850,000 asking price; the daughter understood that it was still to be taken off the top, bringing the final price down to $750,000.   When the father refused to close as scheduled, the daughter and her partner sued.

At trial the court found no enforceable agreement, mainly because the exact purchase price was never agreed between the parties.  On later appeal, the Ontario Court of Appeal confirmed that ruling.

The sale price is a fundamental term in any agreement of purchase and sale for a home.  Here, the parties clearly disagreed over how and when the purported $100,000 “family discount” was to be applied.  When viewed from the standpoint of an objective reasonable bystander, they had simply not come to terms on price.  There was accordingly no valid oral agreement that was enforceable in law by a court.

(And the Court of Appeal noted that the father had sadly died before the hearing before it was held.  The property would therefore remain part of his Estate, for distribution as usual under the terms of his Will).

Full text of the decision: Downey v. Arey, 2022 ONCA 673 (CanLII)

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About the author

Russell Alexander

Russell Alexander is the Founder & Senior Partner of Russell Alexander Collaborative Family Lawyers.