Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice on your agreement of purchase and sale or on the deposit specifically, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to review your agreement of purchase and sale or the deposit and advise accordingly.

Generally, the deposit a buyer puts down in respect of an agreement of purchase and sale is only released by the listing brokerage in very limited circumstances, including:

• performance and completion of the Agreement of Purchase and Sale;
• a term or condition concerning the deposit in the Agreement of Purchase and Sale;
• a mutual release signed by all the parties; or
• court action concerning the deposit leading to a judgment.

If the Agreement of Purchase and Sale is silent on specifically what happens to the deposit on termination, courts will generally take the view that, if the buyer defaults, then the deposit is forfeited to the seller. If the seller defaults under the agreement, however, the deposit is returned to the purchaser (unless the agreement says otherwise). Finally, if the agreement is frustrated because of some event or condition that arises beyond the control of the buyer or seller, then the purchaser is entitled to the return of his or her deposit (unless the agreement says otherwise).

Where the purchaser defaults, there is no requirement for the seller to prove damages. This means that, even in the case where the seller resells at a purchase price that is high enough to compensate for any loss from the first sale, the seller may nevertheless retain the deposit.

Whether a Court will return a deposit to a defaulting purchaser depends on a three-part test – all of which must be satisfied in favour of the purchaser for the deposit to be returned:

• Was the conduct of the purchaser reasonable in the circumstances?
• Was the purpose of the deposit to secure the payment of the purchase price?
• Was there a substantial disparity between the value of the property forfeited and the damage caused to the seller by the breach?

In Gajasinghe v. Dewar, 2007 CarswellOnt 5738, the Ontario Superior Court of Justice applied this three part test and refused to return a $20,000 deposit to the defaulting purchaser. Although the Court found that the purpose of that deposit was to secure the purchase price and that there was a substantial disparity between the amount of the deposit and the amount of damages suffered by the seller, the purchaser’s conduct was not reasonable.  Specifically, the Court found that the purchaser’s actions were “indicative not of a purchaser who was ready and willing to close but rather of one who was searching for an excuse not to close”.

Generally, the deposit is only released by the listing brokerage in very limited circumstances, including:

• performance and completion of the Agreement of Purchase and Sale;
• a term or condition concerning the deposit in the Agreement of Purchase and Sale;
• a mutual release signed by all the parties; or
• court action concerning the deposit leading to a judgment.

If the Agreement of Purchase and Sale is silent on specifically what happens to the deposit on termination, courts will generally take the view that, if the buyer defaults, then the deposit is forfeited to the seller. If the seller defaults under the agreement, however, the deposit is returned to the purchaser (unless the agreement says otherwise). Finally, if the agreement is frustrated because of some event or condition that arises beyond the control of the buyer or seller, then the purchaser is entitled to the return of his or her deposit (unless the agreement says otherwise).

Where the purchaser defaults, there is no requirement for the seller to prove damages. This means that, even in the case where the seller resells at a purchase price that is high enough to compensate for any loss from the first sale, the seller may nevertheless retain the deposit.

Whether a Court will return a deposit to a defaulting purchaser depends on a three-part test – all of which must be satisfied in favour of the purchaser for the deposit to be returned:

• Was the conduct of the purchaser reasonable in the circumstances?
• Was the purpose of the deposit to secure the payment of the purchase price?
• Was there a substantial disparity between the value of the property forfeited and the damage caused to the seller by the breach?

In Gajasinghe v. Dewar, 2007 CarswellOnt 5738, the Ontario Superior Court of Justice applied this three part test and refused to return a $20,000 deposit to the defaulting purchaser. Although the Court found that the purpose of that deposit was to secure the purchase price and that there was a substantial disparity between the amount of the deposit and the amount of damages suffered by the seller, the purchaser’s conduct was not reasonable.  Specifically, the Court found that the purchaser’s actions were “indicative not of a purchaser who was ready and willing to close but rather of one who was searching for an excuse not to close”.

written by admin \\ tags: agreement of purchase, breach, brokerage, circumstances, court of justice, damages, disparity, favour, judgment, ontario superior court, ontario superior court of justice, purchaser, subs, superior court of justice

Please keep in mind that this is not legal advice.  The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about a joint venture, then you are encouraged to seek a professional (e.g. make a post on Dynamic Lawyers).  We have Toronto and Ottawa lawyers who can assist you in this regard (I would know, I’m one of them!).

So this blog will deal with the basics of a joint venture agreement or contract.  In other blogs, I’ll get down to the nitty gritty.

Definition
Plaint and simple, a joint venture is a contract between two or more parties to share resources, knowledge, skills, etc. towards a common objective.

Parties
As usual in these types of agreements, the parties are identified at the get-go (make sure this is done properly or else your contract won’t be worth the paper it’s written on!).

Recitals
This is the background story you want to tell that leads up to the formation of the joint venture.  It could go something like: Party X does Y and has Z.  Party A does B and has C.  The two would now like to join forces to make even more $$$.  So they’re agreeing to have a joint venture in accordance with the terms and conditions set out in the joint venture agreement or contract…

Definitions
It’s a good idea to set out the definitions you’re going to be relying upon near the top of the joint venture agreement (for ease of reference and good organization).  You could include definitions here about “Confidential Information” (assuming there will be confidential information passed between the parties as a result of the joint venture), what constitutes “Force Majeure” (e.g. act of God that relieves a party of liability under the agreement in certain circumstances), etc.

Business Structure
The joint venture agreement or contract will generally state how the joint venture is structured.  Is it simply two separate entities acting in concert through the joint venture agreement or contract?  Will there be a new corporation formed?  Will there be a partnership formed?  Will that partnership be a general or limited liability partnership?  For more discussion about the general forms of business one can structure in Ontario, check out this free information about business structures we’ve been accumulating.

Nature of the Relationship
So will the joint venturers be partners (capable of binding each other), corporate shareholders, or simply joint venturers (i.e. their rights and obligations are limited to the terms of the joint venture agreement or contract).

Term and Termination
How long will the joint venture last for and what events give rise to its premature termination?  Will the parties simply be able to give each other notice?  Will the joint venture dissolve by operation of law, by one party filing for bankruptcy, by one party attempting to illegally assign their interest in the joint venture to a third party, etc.?  Again, you should consult with a lawyer to find out what kinds of things typically go in this section.  Also important is what to do in the even of default.  Does one of the joint venturers become liable to pay the other if they are at fault?  Who determines fault and according to what test (e.g. sole and absolute discretion)?  There’s a lot to think about here…

Joint Venture Assets and Benefits
How will these things be deal with?  Will there be a percentage of ownership?  Will the benefits be based on revenues or profits?  Can these interests be assigned?

Operations
How will the joint venture be operated on a day-to-day basis?  Will the joint venture committee have the power to enter contracts on behalf of the joint venture?  Perhaps the joint venture committee will create a new corporation to take on a certain responsibilities and simply own equally the shares of the new corporation.  That new corporation would operate as a separate business, but its shareholders would be the joint venturers (who would elect the directors, who in turn would appoint the day-to-day officers).  This would be a good place to put reporting and record-keeping requirements too.

Joint Venture Responsibilities
Here, we get to the nitty gritty of who will be responsible for what in the joint venture. Separate paragraphs will be needed for each of the parties.

Joint Venture Management
Will there be a committee?  Will representatives from each of the parties be on the commitee?  Will there be a chairperson?  How will meetings be managed, votes and decision made?  Will there be direction from owners and delegation to the committee?  In my opinion, and as I’ve previously blogged about, businesses should be run as dictatorships with consultants, not as democracies (too many voices means things won’t get done).  

Representations and Warranties
What kinds of true, fair, and complete statements must the parties make to induce the other parties to enter the agreement?  The parties want to know that their joint venturer partners have the authorization and operational wherewithall to do what it is they are about to do.  If these representations and warranties no longer hold true, then what’s the consequence?  Notice?  Termination?  This should be spelled out here…

Liability and Indemnification
Will the joint venturers try to limit their liability from each other in connection with the joint venture?  Will they indemnify each other for their own wrongdoing – whether in contract, tort, negligence, misconduct, breach of statute or otherwise?

General Terms and Conditions
This section of the Joint Venture Agreement will deal with things like (which I’ve previously touched on in teh context of an independent contractor agreement):

• Notices
• Entire Agreement
• Governing Law
• Interpretation
• Assignment
• Waiver
• Cumulative Remedies
• Counterparts
• Enurement
• Entire Agreement
• Time of Essence
• Independent Legal Advice
• Force Majeure
• Severability
• Survival
• Currency

written by admin \\ tags: agreement, assets, bankruptcies, bankruptcy, blog, breach, business, circumstances, confidentiality, contracts, corporation, indemnification, lawyer, lawyers, liabilities, negligence, negotiating, Negotiations, partnership, percentages, relationships, separation, shareholder, shareholders, shareholdings, toronto

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.   If you need legal advice with respect to drafting or reviewing Articles of Incorporation, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto business lawyers registered on the website who can answer your questions or help you draft and submit articles of incorporation for Ontario or Federal corporations.

Incorporating a business: a few words should be written about the roles and responsibilities of those involved with and acting on behalf of or for the corporation.

A corporation is created by having the initial directors file articles of incorporation in the jurisdiction in which the corporation is going to have its head office (provincial licenses will also be required to operate the corporation in particularly provinces).

After this, the directors have got a few things to do to get the corporation organized and up and running.  For example, they will need to pass a By-Law (which gives the corporation’s directors power-making authority), pass director resolutions, issue shares to shareholders (and have the shareholders subscribe to shares), have the shareholders ratify the by-law, have the shareholders vote in the new directors, etc.  Without these essential steps and documents, a corporation is not a legally operational entity.

The board of directors is comprised of individuals and typically a chairperson who oversee the affairs of the corporation , but not typically on a day-to-day basis.  The directors are typically paid to sit on the board, but it’s not a lot of money (as compared with the corporate officers) because they don’t meet that often and are not responsible for the day-to-day affairs of the corporation (as officers are).  The board is typically comprised of individuals with expertise in certain areas and who sit on a number of corporate boards.  They offer their insight and are accountable to the shareholders who vote them in.

For their part, shareholders are the owners of the corporation and have the power to vote in the directors of the corporation.  If there is only one sole shareholder holding all of the shares of the corporation then that person could vote in all of the directors.  It is possible to have only one shareholder and one director of a corporation.

Finally, officers of a corporation are appointed by the board of directors in order to oversee the day-to-day management of the corporation’s affairs.  The titles of officers are not that important, although traditionally most people have come to know officers as one of the following: President, Chief Executive Officer, Treasurer, Chief Financial Officer, Secretary, Vice-President, etc.  It does not really matter what these individuals are called.  Often, their titles, roles, and responsibilities will be outlined in a corporate by-law, which establishes their position and sets out their qualifications, powers, duties, etc.  Officers can be replaced by the board of directors, to whom they are accountable.

So to summarize: shareholders with voting power will vote in the directors on an annual basis (or sooner in certain circumstances), directors have the power to manage the corporation and they meet only a few times a year, and officers (e.g. CEO, VP, CFO, Treasurer, President, etc.) are the people who run the corporation on a daily basis and who are appointed (not elected) by the directors on an annual (or sooner in certain circumstances) basis.

written by admin \\ tags: answers to questions, articles of incorporation, assets and liabilities, blog, board of directors, breach, breach of contract, business lawyers, circumstances, contracts, corporation, federal corporations, federal government, government fees, incorporating a business, incorporation, incorporators, initial directors, insurance, issue shares, jurisdiction, lawyer, lawyers, legal advice, legal entity, limited liability company, nuans, nuans name search, professional assistance, provincial licenses, report, resolutions, search report, separation, shareholders, shareholders vote, toronto, toronto business

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only.  If you need legal advice with respect to creating a limited liability company, you should seek professional assistance (e.g. make a post on Dynamic Lawyers).  We have Toronto business lawyers registered on the website who can answer your questions or help you draft and submit articles of incorporation for Ontario or Federal corporations.

Want to know to incorporate?  First, if you’re trying to do it yourself, it’s pretty straightforward.  You just need to figure out which jurisdiction you’re trying to incorporate and then use a website service provider that will allow you to submit articles of incorporation, conduct a NUANS name search and submit a NUANS name search report, etc.  While the government fees are not high to incorporate (e.g. $200 for a federal corporation, plus $20 for a NUANS name search report), there are a number of questions arise which may lead you to seek out answers to questions relating to how to incorporate.

For example, you may have questions concerning what exactly goes into the Articles of Incorporation.  You can find a previous blog about Articles of Incorporation here. “Articles of Incorporation” is the name of the document that must be submitted to the Federal Government to create a corporation.  A corporation is a separate and distinct legal entity from its incorporators and from its owners, managers, employees, etc.  A corporation has its own rights and obligations; must file its own taxes (at both the provincial and federal levels); has its own income, assets, and liabilities; and can be sued and sue other parties.  These things being said, a corporation must act through other parties (e.g. owners, managers, employees, directors, etc.), who can in turn be held liable for their actions (e.g. negligence, breach of contract, etc.), although the corporation will likely be sued in these circumstances because of things like vicarious liability, insurance, and its otherwise deep pockets.

But simply submitting and having the government approve of your incorporate package is not sufficient to have your company up and running.  In fact, the cheap incorporation companies out there that promise to incorporate your company may not help you establish by-laws (which are power-giving or authority-giving documents that make corporate actions legal), prepare director and shareholder meetings and minutes (which establish accountability and transparency by letting stakeholders know what was decided upon), and finish explaining each party’s (i.e. shareholders, directors, officers, employees) roles and responsibilities vis-a-vis the corporation. Knowing how to incorporate is a good start,  but it’s always wise to consult with a business lawyer (e.g. by making a post on Dynamic Lawyers) with respect to questions about these and other things corporation related.

The roles of the various parties in a corporation will be discussed in the next post…

written by admin \\ tags: answers to questions, articles of incorporation, assets and liabilities, blog, breach, breach of contract, business lawyers, circumstances, contracts, corporation, federal corporations, federal government, government fees, incorporation, incorporators, insurance, jurisdiction, lawyer, lawyers, legal advice, legal entity, limited liability company, negligence, nuans, nuans name search, professional assistance, report, search report, separation, service provider, shareholders, toronto, toronto business

When I was articling in-house, a senior lawyer let me borrow a book that was described as eye-opening and scary.  The book: Who Stole My Cheese? by Ilene Hochberg.  It’s a bestseller and a nicely-written book.  It’s very short and, given that it was a story about mice, looked more like something you’d give to a 7 year old.  I read it in under an hour.

Here’s my synopsis:

The story basically describes 4 mice running around in a maze and looking for cheese.  They happen to come across some wonderful cheese and dig in.  When the cheese begins to run out, 2 of the 4 go off looking for more.  They can tell that the cheese won’t be there for much longer and that it’s getting old and moldy.  So they adapt to the situation and forge ahead, ultimately finding more cheese.  The 2 other mice, however, get too comfortable when they find the cheese and don’t believe it will ever disappear.  When the cheese runs out, they stay put, waiting for more cheese to appear.  They think everything will be fine.  They didn’t smell the rotten cheese on the wall, so to speak…  The cheese runs out and they begin to starve.  They’re scared to move.  They’re paranoid and delusional.  They don’t adapt.  Eventually, one of those 2 mice leaves and finds more cheese and brings the other one over the ‘good side’.

The moral of the story is that we need to adapt to the changing circumstances around us and that our cheese (whatever it is) may not always be there and that we should go off running towards it when it’s time to do so.

This book, while great for some, didn’t phase me.  It only reinforced what  I’d already knew: adapt or starve.  Never take for granted how to acquire more ‘cheese’.

Why mention this here in the DL Blog?  For one simple reason: if traditional lawyers don’t adapt to the changing circumstances (i.e. the use of technology to reduce costs and offer more value added services), they too will start to wonder: who stole my cheese?

written by admin \\ tags: adapt, blog, circumstances, moral of the story, s, technology, who stole my cheese, who stole my cheese synopsis