ONTARIO – ONCA confirms that a valid contract exists if the parties have agreed with certainty as to the essential terms of the contract, even if the formal written agreement was not entered into by the parties.

Ruparell v. J.H. Cochrane Investments Inc. et. al.
2021 ONCA 880 November 30, 2021
Ontario Court of Appeal (Doherty, Benotto and Huscroft JJ.A.,)

This is a short decision of the Court of Appeal upholding Justice Janet Leiper’s decision that a binding agreement existed between the parties for the sale of a car dealership.

The parties signed a non-binding letter of intent. After the letter of intent expired, the parties reached agreement on a number of terms. The respondents then received a higher unsolicited third party offer which they accepted. The trial judge found that the parties had reached an agreement and awarded damages in favor of Ruparell, in lieu of specific performance.

The trial judge found that there were two phases of contract negotiations. The first phase expired when the exclusivity term expired. The second phase of negotiations began with the arrival of the pandemic which negatively affected the appellant’s business: para.6.

During the second phase of negotiations, the trial judge found that the essential terms of the new transaction, price, share sale, financing, security, timing of payment, asset valuation and post-closing adjustments and retaining a key employee were agreed: para.7.

The trial judge also held that the parties agreed to the new terms when the appellant’s advisor told the respondent in a voice message “we have a deal.” In addition, the trial judge held that the parties acted as if they had a deal as the lawyer for the parties, revised the share purchase agreement in accordance with the agreed terms.

The appellants relied on Bawitko Investments Ltd v Kernels Popcorn Ltd. (1991) ,79 DLR( 4th ) 97 ( ONCA) in which the Court of Appeal held that if the essential terms of a contract have not been settled or agreed upon there is no valid contract at law as there is no certainty as to the terms of the contract. (page13). The trial judge distinguished the Bawitko case and held that the parties had come to agreement on the essential terms of the intended formal agreement and met the required standards of certainty.

The ONCA agreed that the contractual terms were sufficiently certain and that the parties agreed to be bound by the terms. There was no palpable or overriding error in the trial judge’s findings. Further the Court of Appeal held that the measure of damages awarded by the trial judge, being the difference between the amount offered by the respondents and the amount offered the third party reflected the lost opportunity, amounting to $5 million, and were correct.