Martha, an 84 year old widow could no longer maintain her cottage property which she and her husband had owned for 40 years.The annual taxes and upkeep were more than she could afford and Martha had not felt well recently.She felt that she had no choice but to sell the property.

Martha contacted her nephew, Gary a local realtor who specialized in cottage properties and asked if he could find a buyer for the property.After listening to Martha discuss her financial and health problems Gary asked how much she wanted for the property.Martha told him that although she really had no idea of the value, the property must be worth at least $200,000.00.Gary told her that he would list her property for sale at that price.

Two days later Gary presented Martha with an offer of $195,000.00 from Lakeview Properties Ltd.When Martha asked what she should do, Gary recommended that she accept the offer since it was close to her price and Lakeview Properties Ltd. was a reputable developer.He also said that the real estate market was very slow and she might not get a better price. Finally Gary said that he would lower his commission from 5% to 4% ($7,800.00) if she accepted the offer.Martha didn't understand contracts or finances since her husband had looked after everything and, feeling pressured from Gary, she signed.

Before the sale was completed, Martha learned that Lakeview Properties Ltd. had entered into an agreement to sell her property for $400,000.00 to Walter.Martha also learned that Gary was the sole owner of Lakeview Properties Ltd.She had thought, based on what Gary had said, that Lakeview Properties Ltd. was a Toronto developer.

Martha's daughter, Mary when informed of the circumstances also discovered that Gary's licence as a realtor has been suspended.Section 22 of the Real Estate & Business Brokers Act states:

"S.22(i)No person shall trade in real estate as a broker or salesperson unless that person holds a valid licence under the Act.

(ii)Any person who violates Section 22(i) shall be subject to a fine of not less than $5,000.00."

Martha does not want to complete the sale and comes to you for advice.

Required:

(i)Discuss whether there is any legal basis for Martha to refuse to sell the property or pay commission.

(ii)Assume that Martha learns that Gary owns Lakeview Properties Ltd. after the property is resold to Walter.Does she have any basis to insist that Walter reconvey the property to her?

Question 2

Assume that Martha, with the assistance of Lucy (her new agent), negotiates directly with Walter for the sale of the cottage.The cottage was listed and advertised for sale for $435,000.00 by Lucy who suggested that this price might elicit multiple offers.

Walter's initial offer was for $425,000.00 with a closing date of August 1.The standard form offer that he submitted included in paragraph 12, on the reverse side, the standard provision that on completion the Purchaser would receive vacant possession of the cottage.Walter intended to use the cottage starting August 1.

Martha wished to make a counteroffer and discussed with Lucy whether it should be for $430,000.00 or more.They decided that the counteroffer would be for $440,000.00 since a number of people had expressed interest in seeing the property and Lucy suggested that there may be other offers forthcoming.

As well, Martha had agreed to rent the cottage for the months of August and September to Sally for $2,000.00 per month and suggested that the completion date be changed to October 1.Her agent, Lucy, suggested that they leave the completion date as August 1, but that she would change the offer so that Walter would assume Sally as Tenant for August and September.

Lucy prepared the counteroffer, deleting the words "on completion" in paragraph 12 and substituting "on October 1".The paragraph setting out the purchase price was amended to read "Four Hundred and Thirty Thousand Dollars ($440,000.00)".There were no other changes.Martha signed the counteroffer as instructed by Lucy without reading it.

Lucy gave Walter the counteroffer but did not discuss the amendments.Walter signed to accept the offer and paid the deposit of $5,000.00.When Walter was signing the closing documents at his lawyer's office, his lawyer asked him to confirm that the purchase price was $440,000.00 and that Martha would retain possession until October 1.Walter disagreed, saying that the purchase price was $430,000.00 and vacant possession was to be provided on completion.Walter said that he was unaware that paragraph 12 on the reverse side had been amended and pointed out that the wording of the purchase price was written as "Four Hundred and Thirty Thousand Dollars" although the written number did say $440,000.00.

Required:

(i)Discuss whether there is a binding contract and, if so, the terms of the agreement.Be certain to explain the applicable legal principles as part of your answer.

(ii)Assume that there is a binding agreement.On July 31, there is a fire and the cottage burns to the ground.How does this affect the rights of the parties?