The Latest on the Need for Certainty in Contracts

The recent decision of the Ontario Court of Appeal in Di Battista v. Di Battista Farms Ltd. et al. is a useful reminder of the requirements for certainty before a contract will be found to be binding and effective.

In this case, Tony Di Battista worked with his three brothers in construction.  Together with their nephew, they started Di Battista Farms Ltd. which owned property in Kleinburg, Ontario.

A dispute arose, and Tony was bought out by the other shareholders.  As part of the buyout, they signed a memorandum of agreement indicating that they would all cooperate with either or both of Tony or their nephew if either decided to try to obtain a building permit to build a house on a part of the property.

The word “cooperation” is open-ended and lacks specificity.

About 15 years later, Tony decided to try to obtain a building permit and asked his brothers to consent to his application for a severance of a section of the property.  They refused.  Tony then sued to enforce the memorandum of agreement.

The judge hearing the matter dismissed Tony’s application, finding that there was not sufficient certainty in the contract.  Tony appealed to the Court of Appeal.  The Court of Appeal agreed with the judge and dismissed the appeal. 

As the Court of Appeal pointed out, for an agreement to be legally binding, there must be sufficient certainty as to its essential terms.  In this case, as the memorandum of agreement committed the brothers to “cooperate” with Tony if he wanted to try to get a building permit, this was simply not good enough.  The Court found that the word “cooperation” is open-ended and lacks specificity.  Furthermore, the agreement failed to specify the location of the parcel to be severed, its dimensions, who would have title if severance was obtained, and what price, if any, was to be paid for the severance.  The Court considered the possibility of implying those terms into the memorandum of agreement and found that there was nothing in the rest of the document that enabled the Court to do so.

This was a case in which a group of family members, perhaps to cut corners or avoid paying for proper legal advice, wrote up an agreement in personal terms but without the knowledge necessary to make it enforceable.  It may well be true that at the time it was signed, the brothers had every intention of cooperating with Tony at any future date if he wished to obtain a building permit.  On a common sense basis, one might well conclude that “cooperation” would have to mean, at the very least, consenting to a severance application.  However, if the test for contractual certainty is not met, common sense will not be enough.  While it may be easy to sympathize with Tony in these circumstances, this case illustrates the importance of getting proper legal advice when entering into transactions – whether present or future – that involve potentially competing legal interests.

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