ONTARIO – Oral Contracts for Sale of Land – Doctrine of Part Performance – Statute of Frauds, s. 4 — When a buyer and a seller of land make an oral agreement for sale, the exception to section 4 of the Statute of Frauds applies if the claiming party proves that 1) all elements of the contract were agreed or acquiesced, 2) substantial steps taken to carry out the transaction making it inequitable to allow the other party to rely on the absence of a written agreement, and 3) there is some evidence of detrimental reliance, which may include the enforcing party’s inability to acquire the property — Trial judge’s finding that doctrine of part performance applies is subject to deference on appeal.

ONTARIO – Oral Contracts – Doctrine of Part Performance – Detrimental Reliance may include all steps taken by the enforcing party, including the enforcing party’s inability to acquire the property.

2730453 Ontario Inc. v. 2380673 Ontario Inc.
2025 ONCA 112 (CanLII) (February 19, 2025)
Ontario Court of Appeal (Miller, Zarnett and Thorburn JJ.A.)

In this appeal, Zarnett J.A., writing for the ONCA, affirmed the decision of Centa J. that an oral agreement for sale of land was binding, and that the vendor was bound to specifically perform the oral agreement on the basis that all aspects of the doctrine of part performance, including the detrimental reliance aspect, were satisfied. (paras. 5-6)

ONCA held that detrimental reliance in the context of part performance is satisfied when;

• The party seeking to enforce the oral agreement (“the “enforcing party”) shows that it acted to its detriment by irremediably carrying out its obligations, or a significant portion of them.
• The other party stood by, making it inequitable to allow that party to rely upon s. 4 of the Statute of Frauds.
• To determine the extent to which there was part performance and resulting detriment, the court may consider the following factors:
  • what the enforcing party did to achieve closing of transaction, and
  • the extent to which that conduct was acquiesced in or encouraged by the other party; and ( 6)
  • the fact that the enforcing party was unable to acquire the property that it wished to combine with its existing property ( 57)

Facts

The respondent wished to buy the appellant’s 32-acre lot in Milton, Ontario, adjacent to land the respondent already owned, to allow for a larger commercial development. In 2018-19, realtors on behalf of both parties discussed a purchase, including price terms and closing date. (paras. 9-10)

The trial judge held that parties reached a binding oral agreement on September 23 or 24, 2019 but did not sign an agreement of purchase and sale (“APS”) because the seller preferred to do so at the time of closing. (paras. 11-12)

Thereafter, each party was represented by lawyers who confirmed that they were acting for buyer and seller respectively on the transaction, and they exchanged emails and relevant documents. The seller’s lawyer sent draft closing documents, including a vendor’s closing certificate and a document registration agreement, and stated that they would be signed by the seller on closing. (paras. 13-18)

The seller’s lawyer stopped responding to correspondence in January 2020 and refused to advise if he was available for a tender of the closing funds and documents. The seller refused to close. (paras. 19-21)

Trial Judge’s Decision

Centa J. held that there was part performance and detrimental reliance sufficient to make it inequitable for the appellant to rely on s. 4 of the Statute of Frauds and held that the oral sale agreement should be enforced. The trial judge identified ten steps taken by both parties that were “unequivocally referable to the land in dispute” (paras. 23-24)

Centa J. also relied on Erie Sand and Gravel Limited v. Tri-B Acres Inc., 2009 ONCA 709, for proposition that the enforcing party must satisfy two aspects of the doctrine of part performance; 1) detrimental reliance, which is a matter of substantive law; and 2) the acts of part performance must sufficiently indicate the existence off the contract. Centa J. concluded that the buyer acted to its detriment in carrying out its obligations in reliance on the existence of a binding agreement and proved acts of part performance sufficiently referable to dealing with the land such that it would be inequitable for the seller to rely upon s. 4 of the Statute of Frauds to avoid performance. (paras. 24–26)

ONCA’s Analysis

On appeal, ONCA trial judge correctly apply the detrimental reliance aspect of the doctrine of part performance. The seller claimed there was no detrimental reliance, in part, because the buyer’s closing funds were not accepted, and the buyer had no other irremediable obligations prior to closing. (paras. 27-28)

Relying on Erie Sand and Gravel, supra. and Hill v. Nova Scotia (Attorney General), 1997 CanLII 401 (SCC), Zarnett J.A. affirmed that “[t]he very purpose of the doctrine of part performance is to avoid the inequitable operation of the Statute of Frauds” and that “If party “A” to an otherwise enforceable agreement stands by while party “B” acts to its detriment by performance of its contractual obligations, party “A” may not rely on the requirements in the Statute of Frauds to excuse its own performance.” (paras. 30-32)

ONCA held that the trial judge was entitled to consider all the acts of part performance referable to the transaction not just the payment of the closing funds. Zarnett J.A. also noted, referring to Bhasin v. Hrynew, 2014 SCC 71, para. 49, that “a real estate transaction involving a multimillion-dollar tract of land is quintessentially one that requires the cooperation of the parties to achieve the objects of the contract”. ONCA agreed that there were many elements of part performance referable to the transaction, which would make inequitable for the seller to rely on s. 4 of the Statute of Frauds. (paras. 34-41)

As to “detrimental reliance” Zarnett J.A. noted the jurisprudence that the enforcing party must have “acted to his detriment in carrying out irremediably his own obligations (or some significant part of them”,) and that “a party has irremediably performed its obligations when it has done so without an independent basis or expectation that it would be compensated for doing so.” All of the buyer’s acts amounted to irremediable performance, while the seller stood by. Once there has been irremediable performance, there is no additional requirement that the detriment be irremediable. (paras. 47-52)

Zarnett J.A. also held that buyer receipt of the deposit did not require the trial judge to assess if the detrimental reliance was nominal or de minimis. ONCA relied on the broader approach referred to in Erie Sand Gravel, supra., para. 68, for the proposition that the real detriment to the buyer is the loss of the property. (paras. 53-58)

Finally, the ONCA held that the trial judge held that the trial judge’s determination whether there was detriment reliance was entitled to deference. (paras. 60-63)

ONCA dismissed the appeal.