Coffey v. High, 2024 ONSC 420
In this case, Jordan and Allison, as buyers, and Sherryl and Larry, as sellers, sign an agreement involving a cottage on May 25, 2021. The closing date of the agreement is set to January 4, 2022. However, in November 2021, the sellers inform the buyers that, due to various reasons, including failure to pay a deposit on time, they will not be finalizing the agreement.
In the agreement, it was stipulated that the buyers make a $10,000 security deposit to the sellers’ legal agent within 24 hours after signing the agreement. It was also stated that, in the event of failure to fulfill important commitments in due time by either party, such as making the security deposit, the other party would have a right to terminate the agreement.
In this case, instead of 24 hours, the security deposit is made after one week, and 5 months later, on November 17, the sellers announce that they are terminating the agreement due to failure to fulfill important commitments as agreed. Then, on December 2, the security deposit is refunded to the buyers.
However, it is important to note that the reason for the delayed payment of the security deposit was the sellers’ own delinquency. As documented, the buyers contacted the sellers about the details of the legal agent twice, and they were able to get them relying only on their own insistence, and the payment was done within 24 hours after receiving the legal agent’s details.
The court believed that although failure to make the security deposit could be used to terminate the agreement under normal circumstances, it was invalid in this case, as a legal agent was not introduced by the sellers in time in order for the buyers to make the security deposit to, and even so the deposit was held with the legal agent for over five months, and not applying for a right to termination for five months meant that the agreement was deemed a normal, valid agreement.
In conclusion, under normal circumstances, failure to make a security deposit on time could be used by the seller to terminate an agreement, however, this cannot be a result of delinquency on the part of the seller, for example by not introducing a legal agent who would be receiving the deposit. Moreover, supposing the buyer does fail to pay the security deposit on time, the seller will still need to apply for a right to termination immediately. Failure to apply in time will mean that the seller did not want to utilize this right.
