In my last blog, I wrote about how parties can become legally bound by an oral settlement agreement, even before an agreement is signed. Since then, I came across an Ontario Court of Appeal decision confirming that oral agreements can also be enforceable in real estate transactions despite the legal requirement that agreements involving land be in writing. So now I get to write a Part 2 to my previous blog.
Under Ontario law, the Statute of Frauds has traditionally served as a safeguard for commercial certainty. It requires that certain contracts, most notably agreements for the purchase and sale of land, be in writing in order to be enforceable. However, both equity and contract law have recognized limited exceptions where the essential terms of an agreement are clearly established through conduct or verbal assent.
The Doctrine of Part Performance
One such exception is the equitable doctrine of part performance, which allows courts to enforce an otherwise unenforceable oral agreement for the sale of land where specific criteria are met.
The doctrine applies where:
- One party has relied to their detriment on the oral agreement; and
- The parties have undertaken acts that are unequivocally referable to the alleged agreement.
When these conditions are satisfied, the absence of a written agreement will not necessarily prevent enforcement.
The Court of Appeal’s Decision
In 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2025 ONCA 112, the Ontario Court of Appeal considered a dispute arising from an oral agreement for the purchase and sale of real property.
The parties negotiated and reached agreement on all essential terms, including the purchase price, key terms of sale, and the proposed closing date. After those terms were settled, both parties retained legal counsel to proceed with the transaction. At the seller’s request, the parties agreed to reduce the agreement to writing closer to the closing date.
However, when the buyer’s lawyer attempted to deliver the requisite closing documents and tender payment, the seller failed to respond. Despite multiple follow‑up attempts, the seller ultimately refused to complete the transaction.
The Court of Appeal upheld the trial judge’s decision that the Buyer’s efforts to complete the transaction constituted part performance as attempting to make payment under an oral agreement of purchase and sale are acts of part performance, as these involve significant time and effort towards the transaction.
Conclusion
The Court of Appeal’s ruling is a cautionary tale for businesses and individuals engaged in real estate transactions. Parties should be mindful that once essential terms are agreed upon—whether orally or informally—and steps are taken to carry out that agreement, the law may treat the deal as binding.
If your business is involved in a real estate or commercial dispute and would like certainty before agreeing to anything, please contact the undersigned for assistance.
Ariel Dorfman, Associate Lawyer