Question 1 Katharine, an 82 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 Katharine had not felt well recently. She felt that she had no choice but to sell the property. Katharine contacted her nephew, Patrick a local realtor who specialized in cottage properties and asked if he could find a buyer for the property. After listening to Katharine discuss her financial and health problems Patrick asked how much she wanted for the property. Katharine told him that although she really had no idea of the value, the property must be worth at least $500,000.00. Patrick told her that he would list her property for sale at that price. Two days later Patrick presented Katharine with an offer of $475,000.00 from Lakeside Properties Ltd. When Katharine asked what she should do, Patrick recommended that she accept the offer since it was close to her price and Lakeside Properties Ltd. was a reputable developer. He also said that the real estate market was overheated and prices might drop at any time. Finally Patrick said that he would lower his commission from 5% to 4% if she accepted the offer. Katharine didn't understand contracts or finances since her husband had looked after everything and, feeling pressured by Patrick, she signed. Before the sale was completed, Katharine learned that Lakeside Properties Ltd. had entered into an agreement to sell her property for $650,000.00 to Erica. Katharine also learned that Patrick was the sole owner of Lakeside Properties Ltd. She had thought, based on what Patrick had said, that Lakeside Properties Ltd. was a Toronto developer. Katharine does not want to complete the sale and comes to you for advice. Required: (i) Discuss whether there is any legal basis for Katharine to refuse to sell the property. What is her potential liability if she does refuse to sell? (ii) Assume that Katharine learns that Patrick owns Lakeside Properties Ltd. after the property is resold to Erica. Does she have any basis to insist that Erica reconvey the property to her? Question 2 Assume that Katharine is successful in retaining her cottage. With the assistance of Brad (her new agent), she negotiates directly with Erica for the sale of the cottage. The cottage was listed and advertised for sale for $650,000.00 by Brad who suggested that this price might elicit multiple offers. 2 Erica's initial offer was for $650,000.00 with a closing date of August 1. The standard form offer that she submitted included in paragraph 12, on the reverse side, the standard provision that on completion the Purchaser would receive vacant possession of the cottage. Erica intended to use the cottage starting August 1. Katharine wished to make a counteroffer and discussed with Brad whether it should be for $675,000.00 or more. They decided that the counteroffer would be for $685,000.00 since a number of people had expressed interest in seeing the property and Brad suggested that there may be other offers forthcoming. As well, Katharine had agreed to rent the cottage for the months of August and September to Andrew for $3,000.00 per month and suggested that the completion date be changed to October 1. Her agent, Brad, suggested that they leave the completion date as August 1, but that he would change the offer so that Katharine could keep Andrew as a Tenant for August and September. Brad 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 "Six Hundred and Seventy-Five Thousand Dollars ($685,000.00)". As well, a paragraph was added to stipulate that a deposit of $100,000.00 was due within 24 hours of acceptance. There were no other changes. Katharine signed the counteroffer as instructed by Brad without reading it. Brad gave Erica the counteroffer but did not discuss the amendments. Erica signed to accept the offer but said that she would need a couple of days to cash in her investments to pay the deposit. She paid the deposit 5 days after acceptance. When Erica was signing the closing documents at her lawyer's office, her lawyer asked her to confirm that the purchase price was $685,000.00 and that Katharine would retain possession until October 1. Erica disagreed, saying that the purchase price was $675,000.00 and vacant possession was to be provided on completion. Erica said that she 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 "Six Hundred and Seventy-Five Thousand Dollars" although the written number did say $685,000.00. Katharine has received another offer for the property with a purchase price of $750,000.00 and would like to get out of the contract in any event. 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?