Given the significant weight of buying and selling a home, there are myriad of requirements that parties to a residential real estate transaction must meet in order for the deal to be legally binding. One of the most notable and self-evident requirements is that agreements to buy and/or sell land must be in writing.
In Ontario, the cornerstone of any real estate transaction is the Agreement of Purchase and Sale ("APS"). The APS is a standard form issued by the Ontario Real Estate Association ("OREA") that codifies in writing all conditions of a particular real estate transaction, such as the purchase price, the specifics of the land and its boundaries, and assurances that all portions of the property are in good working order.
But what happens if the buyer and seller only agree verbally, with absolutely nothing in writing?
The Statute of Frauds
Ontario's Statute of Frauds, R.S.O. 1990, c. S.19 (the "Act") is an adoption of a 17th-century English law by the same name. This Act, and those similar to it in Canadian and international jurisdictions, requires certain kinds of contracts to be in writing. The goal of the Act is to prevent fraud from arising out of contracts not in writing.
Section 4 of the Act provides as follows:
Writing required for certain contracts
S. 4 No action shall be brought to charge any executor or administrator upon any special promise to answer damages out of the executor's or administrator's own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person, or to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.
In other words, s. 4 states that agreements to sell land, pieces of land, or interests in land are only enforceable if they are written and signed. This means that if one party breaches the agreement or otherwise does not follow through on it, the other party is without legal recourse.
Exceptions to the Act: Part Performance
While the goal of the Act is to prevent fraud, the courts realized that the Act, particularly s.4, could be and, in fact, was being used as an instrument of fraud itself, as it enabled the party in breach to legally default on their contractual obligations and avoid punishment. So, the courts carved out an exception to the general rule that contracts to buy/sell land must be in writing: the doctrine of part performance.1
Part performance is an equitable doctrine that is somewhat self-explanatory. Essentially, where one party under an oral agreement partially perform their obligations pursuant to the oral agreement, the steps they took in such performance can assist that party in enforcing the contract, which would otherwise be unenforceable as it is not in writing. The key is that the party who took those steps under the contract did so to their detriment, such that they only acted in this way because they were relying on the other party to hold up their end of the deal. If the other party backs out of the agreement, the party who had performed under the agreement will have grounds to enforce it vis-à-vis the doctrine of part performance.
The recent appellate decision in 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2025 ONCA 112, offers an excellent illustration of how the doctrine of part performance works to enforce an oral agreement to sell land. Below is an analysis of this case.
Case Analysis: 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2025 ONCA 112
In this case, 2730453 Ontario Inc. was the buyer (the "Respondent") and 2380673 Ontario Inc. was the seller (the "Appellant"). In September 2019, the parties orally agreed that the Appellant would sell a 32-acre lot to the Respondent for $4.1 million cash and that, if the deal closed on or before January 8, 2020, the Respondent would have to pay commission of $200,000 to the brokers (the "Agreement").2 The parties did not sign an APS or any other written contract at the time the Agreement was made because it was the Appellant's preference that this be done at the time of closing.3
After the Agreement was made, both parties retained counsel and left it to them to finalize and close the deal. Counsel continued to exchange draft documentation and work out the final details throughout the fall of 2019.4 On January 3, 2020, the Respondent's lawyer sent the Appellant's lawyer the signed sale agreement and requested that the Appellant sign the written agreement and deliver all other necessary documents by January 8, 2020. The Appellant's lawyer did not respond. The closing date arrived, and the Appellant refused to close.5
The Respondent then sued the Appellant for refusing to close the deal. At trial, the Appellant argued that the Act is "a complete bar to recognizing this purported sale."6 The trial judge disagreed and found that the doctrine of part performance applied; therefore, the Agreement is enforceable.7 The trial judge ordered that the sale proceed in accordance with the terms previously agreed to by the parties.8
The Appellant then appealed to the ONCA and lost again. In unanimously dismissing the Appellant's appeal, the ONCA explained that to successfully demonstrate part performance of an oral agreement, the party seeking its enforcement must meet the following two requirements:
- Evidentiary aspect – the party seeking enforcement engaged in conduct that is "integrally connected to what is required to close the transaction"9; and
- Detrimental reliance – in engaging in the above conduct, that party acted to its detriment by performing its obligations under the unenforceable contract.
The coincidence of these two aspects creates part performance. Where one party partly performed under an oral agreement to sell land, it would be inequitable for the other party to rely on s. 4 of the Act to escape performing its own obligations pursuant to that oral agreement. This is why part performance is an exception to the general rule against enforcing oral agreements to sell land.
In this case, the ONCA agreed with the trial judge that the Respondent had partly performed under the Agreement. Specifically, the trial judge found that, among other things, the following actions were "unequivocally referable to the land in dispute" (i.e., integrally connected to the transaction):
- Obtaining an environmental assessment of the property;
- Conducting due diligence related to the property;
- Retaining legal counsel to close the Agreement;
- Delivering the documents required on closing; and
- Obtaining, delivering, and tendering the certified cheque for the $4.1 million purchase price.10
Further, the Respondent detrimentally relied on the Appellant in carrying out these acts. The Respondent was doing what it ought to have done according to the Agreement, and would not have done so but for the existence of the Agreement. The Respondent, while performing its obligations under the Agreement, was relying on the Appellant to do the same.11 The Appellant did not follow through under the Agreement, and the Agreement failed. This was inequitable toward the Respondent and, therefore, the ONCA concluded that this case was in line with the exception to the general rule against enforcing oral agreements to sell land. The Agreement was thus upheld and enforced.
Conclusion
In general, oral agreements to sell land are not enforceable. If you orally agree to sell your home to someone, it is generally not going to be upheld by the courts in Ontario. However, if one or both parties to an oral agreement partly perform under that agreement to the extent that one party detrimentally relied on the other party to do the same, then the Ontario courts may enforce the contract as an exception to the general rule.
Footnotes
1. 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2025 ONCA 112 at para 2 [Appeal].
2. Ibid at para 11.
3. Ibid at para 12.
4. Ibid at paras 13-7.
5. Ibid at paras 18-21.
6. 2730453 Ont. Inc. v. 2380673 Ont. Inc., 2022 ONSC 6660 at para 48 [Trial].
7. Ibid at paras 122-4.
8. Ibid at para 153.
9. Appeal, supra note 1 at para 36.
10. Ibid at para 24.
11. Ibid at paras 49-52.
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