The recent decision of Intergulf Investment Corporation v. 0954704 B.C. Ltd. from the British Columbia Court of Appeal (Court of Appeal) serves as a reminder to buyers and sellers of real estate, and their agents, to exercise care when drafting purchase and sale agreements. It should also help put to rest an outdated and unnecessary practice of writing the purchase price, or any other numbers in an agreement, in both numbers and words.
In this case, the parties entered into purchase and sale agreements for three properties in North Vancouver with redevelopment potential. The purchase agreements contained discrepancies in the name of the buyer and the purchase price, which was written in both numbers and words. The seller refused to close, arguing the purchase agreements were not enforceable because of, among other things, uncertainty as to the terms. The Court of Appeal and lower court disagreed and found the purchase agreements were enforceable.
While the correct outcome was reached in this case, time and money could have been saved had the parties exercised more care in drafting their purchase agreements.
The offers were originally drafted by the buyer’s agent. The buyer’s name was inadvertently shown as “Intergulf Development Corporation.” The buyer corrected many, but not all, of those errors by striking out “Development” and replacing it with “Investment.” The purchaser initialled the changes and submitted the offers to the seller.
As is common, the seller submitted counter-offers, including changes to the purchase prices. However, the changed purchase prices were written in numbers and words that were inconsistent. The counter-offers were ultimately accepted by the buyer, but neither party noticed the discrepancies between the written and numerical description of the purchase prices.
After the parties failed to agree on the terms of purchase of a fourth property, the seller tried to get out of the transactions on the basis that the purchase agreements were not enforceable because the parties and the purchase prices were uncertain, among other things. The buyer sued.
Both the lower court and the Court of Appeal rejected the seller’s arguments, among others, that the purchase agreements were not enforceable because of uncertainty as to the parties and the purchase price. On the evidence, the courts found the parties reached agreement on the essential terms: i) the buyer’s name was corrected, and initialled by both parties, in several places; and ii) each party understood and agreed that the correct purchase prices were those written in numbers, not words. The Court of Appeal concluded that the purchase agreements “on their face and read in sequence easily establish with certainty” the identity of the buyer and the purchase prices so as to be enforceable. Even if that was not the case, the Court of Appeal held that the facts of the case justified rectification of the purchase agreements to correct the mistakes.
While neither court in this case commented on the practice of duplicate reflections of purchase price in a purchase agreement, it is worth reflecting on it.
There is no legal requirement to write the purchase price, or any other number, in both numbers and words to make a binding agreement. It is redundant and, as this case shows, can lead to errors. The inclusion of both numbers and words is likely a carry-over from past practices to safeguard against fraudulently altered documents—changing the written form of a number is much more difficult than adding a digit or three. In Legal Writing in Plain English: A Text with Exercises, Bryan A. Garner lists other oft-cited reasons for the use of both numbers and words as safeguarding against typos, increasing readability, aiding in case of illegible handwriting, maintaining readability for the illiterate, and preventing discrepancies in numbers. These reasons are questionable in light of the far more common scenario that using both numbers and words creates the potential for discrepancies that, as in this case, can give ammunition to a party seeking to avoid its legal obligations.
We caution that in some jurisdictions, the use of numbers, words or both may be required by law. For instance, the Quebec Notaries Act requires, in documents to be notarized, that amounts, dates, numbers and other figures, other than simple references that are not absolutely essential, to be written out in full and in letters, and entries written out in full and in letters take precedence over numbers in case of discrepancy.
This case is a cautionary tale against inattentive contract drafting. The key takeaways are to be diligent in ensuring the mutual intention of the parties is reflected in the contract itself, without having to resort to costly interpretation by a court, and to stop writing purchase prices in both numbers and words.
For further information, please contact:
Mike Ventresca 604-631-3392
or any other member of our Commercial Real Estate group.
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