Purchase Agreement S.3.1(g) – Due Diligence

S. 3.1 (g) - Due Diligence

In this post we continue our review of s. 3.1 of the Purchase Contract.
3.1 In fulfilling this contract, the seller and buyer agree to act reasonably and in good faith and agree that:

(g) the seller and buyer are reach responsible for completing their own due diligence and will assume all risks if they do not;

This subsection is self-explanatory but unfortunately quite often gets ignored. Subsection (i) elaborates on and gives specific examples regarding this subsection from the perspective of the buyer. However, read by itself, the burden is put on each party to do their respective “research” or “homework” before they agree on the sale.

The previously discussed Patent Defects (link here) is one clear example of such due diligence. Another example of (which was presented to the Court as a claim of Latent Defect) is sale of houses with stigma. British Columbia Court of Appeal recently dealt with such a case in Wang v. Shao, 2019 BCCA 130 (Full case reported here). The Court decided that the Seller did not have a duty to disclose a murder that happened at the property-front because the Seller had no reason to know that such a fact was material to the buyer. When reading such a case (summary found in https://globalnews.ca/news/5196253/murder-mansion-disclosure/), please keep in mind that usually at the centre of every dispute lies multiple inter-related legal principles (in this case it was Material Latent Defects and Fraudulent Representation) so we do not intend to represent the BC case as a clear application of s. 3.1 (g). Moreover, the judgment is a provincial ruling (i.e. not a Supreme Court of Canada judgment) so it remains to be seen if other jurisdictions follow a similar line of logic or what the Supreme Court rules if this case (or a similar case) ever makes it there.

The unequivocal lesson from the case is that when buying a house, do your research in advance and ask any questions that may be important to you (as far fetched as they may sound to you at the time) from your seller so you’d be in possession of all relevant knowledge regarding the property before you put an offer on a property and definitely before you waive your conditions.

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