Under Ontario’s Statute of Frauds, verbal agreements respecting land are deemed unenforceable. As the Superior Court of Justice commented in Van, et al. v. Qureshi, et al., the statute’s purpose was to prevent “fraudulent allegations of promises that had never been made, by requiring a formality in certain classes of agreement.” The Ontario Court of Appeal has also clarified the purpose of section 4, in particular, is “to prevent fraudulent dealings in land based on perjured evidence” (see Erie Sand & Gravel Limited v. Seres’ Farms Ltd.).
But what happens when a party that has entered into a verbal contract involving land attempts to use the Statute of Frauds to absolve itself of the obligations created by the contract or for some other nefarious purpose? The Ontario Court of Appeal has found that the Statute of Frauds cannot be used as “an engine of fraud”. To guard against this, the common law developed the doctrine of part performance.
What Is the Doctrine of Part Performance?
The Court of Appeal in Erie Sand & Gravel explained where a party to a contract made unenforceable by the Statute of Frauds simply stands by while the other party acts to his own detriment in fulfilling his own obligations under the contract, equity will enforce the contract despite the statute. In other words, the doctrine generally provides that a verbal agreement that is partly performed will be implemented, even if it would be otherwise unenforceable under the Statute of Frauds.
As the Supreme Court of Canada commented in Hill v. Nova Scotia, “where the terms of an agreement have already been carried out, the danger of fraud is averted or at least greatly reduced.” Evidence of part performance, therefore, does not undermine the purpose of the writing requirement set out in the Statute of Frauds.
Requirements for the Doctrine of Part Performance
The doctrine of part performance will only apply if there is an enforceable written agreement.
Once it is determined that an enforceable verbal agreement exists, the doctrine will only apply if there is:
- Detrimental reliance; and
- Acts of part performance that “sufficiently indicate the existence of the contract” (Xynos v. Xynos).
Determining Whether There Have Been “Acts of Part Performance”
Concerning acts of part performance, the conduct cannot just refer to the property in question. It must also, in and of itself, indicate there has been some dealing with the land. As the Court explained in Xynos, it is only where the acts of part performance are unequivocal in referring to the verbal agreement and have no other purpose or reason that they effectively can prove the existence of the oral contract. If the acts are not unequivocal, “they provide too little assurance against fraud to displace the writing requirement in the statute.”
A court may consider the acts of both parties to an alleged oral agreement when attempting to determine if they are sufficient to save the agreement from being invalidated by the Statute of Frauds.
Case Considers Application of the Doctrine of Part Performance in the Context of Family Arrangement
By way of an example of the doctrine of part performance, the doctrine was examined by the Superior Court of Justice in Xynos v. Xynos, which concerned a family dispute. The plaintiff, an 88-year-old widow, held legal title to a house in Scarborough, where she had lived with her husband until he died in 2007. She wished to sell the house but could not because her son, the defendant, occupied it. Her son alleged that, in a conversation in 2010, the plaintiff had told him she would sell the house to him for $350,000. He had not paid his mother for the property, and the title to it had not been transferred to him. Among other things, the mother sought a declaration that her son had no interest in the property.
Court Examined Doctrine Despite Lack of Enforceable Written Contract
The Court began by considering whether an enforceable verbal agreement had been formed between the parties. It found that significant aspects of the sale had not been verbally agreed upon, specifically the time frame for the sale, the net purchase price to be paid, and the closing date. As such, no enforceable contract existed between the parties, and it was unnecessary to apply the doctrine of part performance.
Regardless, the Court went on to apply the doctrine in the event it had reached the wrong conclusion on the verbal agreement. The Court found the two requirements of the doctrine were not met. While the defendant had paid certain expenses while living in his mother’s house, the Court noted that this was consistent with the actions of a son “who is grateful to his mother for providing him with a house in which to live rent-free.” In other words, those actions were not “unequivocally referable in their own nature” to the alleged agreement to purchase the house.
The Court also found no detrimental reliance since the son had lived in the house rent-free for at least 12 years. While the defendant argued his mother had benefitted from his “detrimental reliance on their agreement,” the Court found that the only benefit the mother obtained was “the knowledge that she was able to assist her son, who was experiencing financial difficulties.”
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