The British Columbia Court of Appeal has in the recent case of Argo Ventures Inc. v Choi, 2020 BCCA 17 addressed and answered the question of whether a purchaser who enters into a contract to purchase property but fails to pay the deposit, still has to pay the deposit in the event that they repudiate the contract.
In the Argo case, the purchasers entered into a contract to purchase a property in Port Coquitlam for approximately $6.5 million. The contract was subject free and became immediately binding upon signature with an initial non-refundable deposit of $300,000.00 to be paid by the purchasers within 10 business days. The purchasers ultimately decided to walk away from the deal but had not paid the deposit. After the period for payment of the deposit had expired the vendor accepted the purchaser’s repudiation of the contract and then sued for the deposit.
At the Supreme Court level, the trial judge awarded judgment in favour of the vendor for the unpaid deposit but the purchasers appealed arguing, among other things, that an unpaid deposit, unlike a paid deposit, cannot be forfeited upon repudiation of a contract.
The Court of Appeal dismissed the appeal finding that whilst a deposit could not be “forfeited” if it had not been paid, a vendor could still sue for the unpaid deposit that is due and owing under the contract at the time the vendor accepts the purchaser’s repudiation. The Court of Appeal noted that if the purchaser’s argument was successful it would create an inequitable situation whereby a party to a contract could take advantage of its breach to put itself in a better position than it would have been had it met its contractual obligation to pay the deposit.
Prior to the Argo case there had been some uncertainty as to whether an unpaid deposit could be claimed by a vendor in these circumstances but this case confirms that a vendor can rely on the contractual terms and claim the unpaid deposit. From a vendor’s perspective it would be prudent however to only accept a purchaser’s repudiation after the deposit has become due and payable pursuant to the terms of the contract.
If you have any questions about this case, or a face a similar situation, please feel free to contact us for more information.