OREA Contract Law for Real Estate 2 — Questions and Answers
Question 1: In Ontario real estate, what is a 'condition precedent' in an Agreement of Purchase and Sale?
- A condition that must be fulfilled after closing
- A condition that must be satisfied before the contract becomes binding, such as obtaining financing or a satisfactory home inspection (Correct answer)
- A mandatory clause required by RECO in all contracts
- A condition that only applies to commercial transactions
Correct answer: A condition that must be satisfied before the contract becomes binding, such as obtaining financing or a satisfactory home inspection
A condition precedent is a clause that must be fulfilled before the contract becomes firm and binding. Common conditions include financing approval, satisfactory home inspection, and sale of the buyer's existing home. If the condition is not met, the buyer can usually walk away.
Question 2: What is a 'waiver' in the context of conditions in an Ontario Agreement of Purchase and Sale?
- A document that releases the real estate agent from liability
- The voluntary relinquishment of a condition by the party for whose benefit the condition was inserted (Correct answer)
- A mandatory government form
- The automatic removal of all conditions at closing
Correct answer: The voluntary relinquishment of a condition by the party for whose benefit the condition was inserted
A waiver occurs when the party benefiting from a condition voluntarily gives up the right to that condition, making the contract firm and binding without that condition being fulfilled. For example, a buyer might waive a financing condition if they secure funds from another source.
Question 3: Under Ontario law, what remedies are available to a buyer if the seller breaches an Agreement of Purchase and Sale?
- Only monetary damages
- Specific performance, monetary damages, rescission, or a combination depending on the circumstances (Correct answer)
- The buyer can only cancel the contract
- No remedies are available — the buyer must find another property
Correct answer: Specific performance, monetary damages, rescission, or a combination depending on the circumstances
When a seller breaches the agreement, the buyer may seek specific performance (forcing the sale), monetary damages (compensation for losses), rescission (canceling the contract and returning the parties to their original positions), or a combination of remedies.
Question 4: In Ontario, what is an 'amendment' to an Agreement of Purchase and Sale?
- A new contract that replaces the original
- A written change to the terms of an existing agreement, agreed to by all parties (Correct answer)
- A verbal modification that does not need to be in writing
- A unilateral change made by the buyer
Correct answer: A written change to the terms of an existing agreement, agreed to by all parties
An amendment is a written document that modifies specific terms of an existing Agreement of Purchase and Sale. It must be agreed to and signed by all parties. The amendment becomes part of the original agreement and is enforceable.
Question 5: What is 'tender' in Ontario real estate contract law?
- A type of bidding process for commercial properties
- The unconditional offer to perform one's obligations under the contract, typically by being ready, willing, and able to close on the closing date (Correct answer)
- A request for proposals from contractors
- A deposit paid at the time of offer
Correct answer: The unconditional offer to perform one's obligations under the contract, typically by being ready, willing, and able to close on the closing date
Tender means presenting oneself as ready, willing, and able to complete the transaction on the closing date. If one party tenders and the other fails to close, the tendering party can pursue legal remedies for breach of contract.
Question 6: In Ontario, what is the difference between 'void' and 'voidable' contracts in real estate?
- There is no difference
- A void contract has no legal effect from the beginning; a voidable contract is valid until one party chooses to set it aside (Correct answer)
- A voidable contract is more serious than a void contract
- Both types require court approval to enforce
Correct answer: A void contract has no legal effect from the beginning; a voidable contract is valid until one party chooses to set it aside
A void contract has no legal force from its inception — it is as if the contract never existed (e.g., a contract for an illegal purpose). A voidable contract is valid and enforceable but can be set aside at the option of one party (e.g., due to misrepresentation or lack of capacity).
OREA Contract Law for Real Estate 2
In Ontario real estate, what is a 'condition precedent' in an Agreement of Purchase and Sale?