The commitment to provide proof of solvency within a short period of time is well understood in the case of a cash sale. This is equivalent to an offer subject to financing.
The euphoria that often takes hold of some home buyers when they sign their purchase offer can sometimes be costly. Thus, a lawyer, surely caught up in this euphoria, submits an offer to acquire a residence, even before selling the one he already owns. After negotiations through a real estate agent, he writes the number "0" as the need for mortgage financing in the counter-offer, while adding on the same document, in handwriting, the mention "proof of solvency to be provided".
Having still not sold his house and after multiple discussions, the offeror refuses to sign the purchase agreement, stating "that there is no transaction because the condition regarding proof of solvency is not met". The owner, having sold his house to a new buyer for a price $125,000 lower than the offer made by the offeror, turns to the Court* and claims this amount as damages.
The Court concludes that "the commitment to provide proof of solvency within a short period of time is well understood in the case of a cash sale". The wording of the offeror's counter-offer as written is equivalent "to a counter-offer subject to financing condition" and the court orders the offeror to pay the owner the claimed amount as compensation.
In law as in cooking, when drafting a contract or preparing a sauce, it is important to include the right ingredients, otherwise both can go wrong.
*C.A. Québec 200-09-005677-050
