When involved in a real estate transaction, many individuals are already familiar with the
Agreement of Purchase and Sale (APS). The APS is a written contract that determines the
terms of the sale of a property as well as the requirements and obligations that both the
vendor and the purchaser must abide by. In real estate transactions, breaches of the APS may
often occur, such as the failure to deliver funds by the closing date set out in the APS.
But there exists another type of breach of contract: an anticipatory breach/repudiation. An
anticipatory breach is defined by when one party to a contract, before the date they must
preform an obligation, gives notice that they will not preform their obligation—that is, they
intend to breach their obligation.1 Parties can give notice through words or conduct.
When a party receives notice of an anticipatory breach, they have two options. First, they
may accept the repudiation, and all parties will be relieved of their obligations under it, and
the innocent party may sue for damages immediately. Second, If the innocent party affirms
the contract, the contract remains alive in all respects for both parties. But the party who does
not accept the repudiation must be willing and able to render their obligations as per the
terms of the contract.
But what is meant by intention when one party to an APS intends to repudiate an agreement
or show an intention before the closing date to not complete the contract? This issue was
dealt with by the Ontario Superior Court in Sheik v Lebovic Enterprises Limited. 2 The legal
test for anticipatory breach is whether a reasonable person would conclude that the breaching
party no longer intends to be bound by it.
In Sheik, the purchaser, Sheik, entered into an agreement with the builder, Lebovic
Enterprises Limited, to purchase a pre-construction home. The plans for the pre-construction
home included a door from the garage into the house, if the grade permitted it. When the
agreement was entered into, the grade had not yet been determined.
Upon visiting the construction site, Sheik noticed there was no door from the garage into the
house. Sheik emailed the builder inquiring into this issue, and after not receiving a
satisfactory answer, claimed he would be going to court over the builder’s inability to offer a
satisfactory response over the issue of the garage door. In response, Sheik received
correspondence from the builder’s lawyer stating Sheik had breached the APS. Sheik
responded that he was still interested in moving forward with the sale. The builder, without
corresponding with Sheik, transferred title of the home to a third-party. Sheik then sued for
damages. The builder argued that Sheik’s threat to sue, among other things, constituted an
anticipatory breach of the APS.
The Court disagreed with the builder. Contrary to the builder’s point, Sheik’s repeated
attempts at communication and statement that he wished to go through with the sale showed
no clear intention that he intended to repudiate the contract. 3 Moreover, Sheik’s email
including the possibility of a lawsuit amounted to nothing more than an idle threat.
The case makes it clear that differences over terms in the APS do not constitute a breach of
contract if the party expressing their disagreement makes it clear that they intend to complete
their obligations in the contract.
Disclaimer:
The information presented above is solely for general educational and informational
purposes. It is not intended to be, and should not be taken as, legal advice. The information
given above may not be applicable in all cases and may not even reflect the most recent
authority after the date of its publication. As a result, please refer to all updated legislation,
statutes, and amendments. Nothing in this article should be relied on or acted upon without
the benefit of legal advice based on the specific facts and circumstances described, and
nothing in this article should be interpreted otherwise.
About the Author: Anton Marsic is in his second year at the University of Ottawa Faculty of Law – Common
Law.
1 Pompeani v Bonik Inc., 1997 CarswellOnt 3744 at para 40.
2 Sheikl v Lebovic Enterprises Limited, 2021 ONSC 8512 [Sheik].
3 Ibid at para 23.
