Setting aside a lower court’s decision, the New Brunswick Court of Appeal determined in Druet v. Girouard that writing requirements under the Electronic Transactions Act and the Statute of Frauds, the price, parties, and property, the assumption of an existing mortgage, the payment of closing fees, joinder, and the intent to create legal relations, can, when taken together, make the purchase of a condo through e-mail legally binding.
“As a matter of general principle, we accept that an exchange of emails can satisfy the writing requirement under the Electronic Transactions Act and, correlatively, the Statute of Frauds,” wrote justices Joseph Robertson and Marc Richard with Justice Wallace Turnbull concurring. “Of course, to reach this conclusion, one must apply the principle of ‘joinder.’ We also accept that the parties reached an agreement with respect to the essential terms (the 3 Ps, namely, price, parties and property) and two other matters: the assumption of the existing mortgage and payment of closing fees.”
But in this particular case, the court ruled that the e-mails did not show sufficient legal intent to create a binding contract.
“In short, the e-mails do not represent the type of detailed agreements which have propelled some courts to conclude the execution of a formal document would serve no valid purpose other than to provide one of the parties with a feeble legal excuse for reneging on an agreement,” says the ruling.
Druet and Girouard appeared to be reaching a consensus on the condo’s sale in 2010, but Druet ultimately withdrew her offer to sell the condo, saying her partner, who was vacationing in Peru, did not agree to the purchase price Girouard and Druet had reached.
Girouard brought a motion under Rule 23 to determine whether or not the e-mails constituted a binding agreement and sought compensation from Druet under the Act of Frauds.
The Court of Queen’s Bench of New Brunswick ruled last year that the e-mails constituted a binding agreement between Druet and Girouard and ordered Druet pay $1,000 to Girouard.
“After reviewing the mail, I am convinced that they constitute a binding agreement. The reference to the agreement of purchase and sale was not an indication that there was agreement regarding the conclusion of another contract. The clauses in e-mails is clear and easy to perform,” wrote Court of Queen’s Bench Justice George Rideout. “There is no indication that it was subject to acceptance from Mrs. Druet. It is recognized that there is no closing date, but, given the other clauses, it is reasonable to argue that a reasonable time to complete the purchase or could be implied that the usual practice in the field property, a closing date in mid to late next month, was implied.”
But the appellant court ruled while the Court of Queen’s Bench was correct to determine most of the legal requirements to establish the purchase of the condo had been met, the court was ultimately wrong to dismiss that a formal contract was necessary to make the e-mail agreements legally binding, and allowed Druet’s appeal.
“Moreover, we have concluded Mr. Girouard’s reference to the future preparation of a draft agreement for Ms. Druet’s review is normally interpreted to mean that the parties did not intend to create a binding contract until such time as a formal agreement was prepared and executed,” says the appeal decision. “The reasonable bystander also knows that the exchange of e-mails represents a skeletal contractual framework worked out without the assistance of professional advice . . . more importantly, neither Mr. Girouard nor Mrs. Girouard had ever viewed Ms. Druet’s condominium unit.”
The ruling continues: “Frankly, there is more legal formality surrounding the millions of transactions that occur daily on eBay than what occurred in the present case. Parties to a real estate transaction who are strangers usually fix a closing date, obtain a deposit and, most importantly, sign a formal purchase and sale agreement.”
As a result, the appellant court allowed Druet’s appeal and set aside the motion judge’s order. The court also awarded $3,500 to Druet on the motion in the Court of Queen’s Bench. With regard to Druet’s appeal, the Court of Appeal found Druet is entitled to disbarments only, fixed at $1,500.
Update: May 3, 2012 to change headline and clarify aspects of the ruling.