The Ontario Court of Appeal's recent decision in Shiralian v. Wyldewood Creek Inc., 2026 ONCA 163, examines the limits of a purchaser's entitlement to damages where a vendor terminates a pre-construction condominium agreement following the expiry of the completion deadline under the Tarion Addendum.
Facts: The purchaser purchases a residential pre-construction condominium built by the vendor. The agreement of purchase and sale contained a standard Tarion Addendum. This is a statutory addendum to any agreement of purchase and sale in Ontario as required under the Ontario New Home Warranties Plan Act, RSO 1990, c O.31. The Addendum included a condition permitting the vendor to terminate the Agreement if they were not able to obtain mortgage financing for the construction of the project. The agreement also included a limitation of liability clause. According to the limitation of liability clause, the purchasers’ remedies for any default by the vendor were restricted and limited to the return of their deposits plus interest. The vendor terminates the agreement of purchase and sale and is in breach of the contract. The purchasers commenced an action against this breach and further that the limitation of liability clause should not preclude a damages award. The application judge agreed with the purchasers and found that the vendor is in breach of the agreement of purchase and sale. However, the judge limited the purchaser’s damages to their deposits plus interests in accordance with the limitation of liability clause of the agreement. Purchasers were unhappy with this decision of the application judge. Hence the appeal. The purchasers argued that the application judge erred by enforcing the limitation of liability clause as it undermines the consumer protection afforded by the prescribed termination deadlines in the Tarion Addendum.
As such, the focus of the appeal is the limitation of liability clauses of the agreement. The central issue was the interpretation and enforceability of the limitation of liability clauses in the Agreement of Purchase and Sale for a pre-construction condominium. While dismissing the appeal, the Court of Appeal relied on the following three cases that were reviewed by the application judge:
- The application judge considered that the plain language of limitation of liability clause must be interpreted in the context of the entire agreement of purchase and sale. This interpretation follows the governing principles of contractual interpretation by the Supreme Court in Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53 (2014) 2 SCR 633. The court states that the interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract. The Tarion Addendum of the APS does not stipulate measures of the damages or other consequences from a vendor’s default beyond the return of the purchaser’s deposit with interest.
- The application judge follows the three-step approach of enforceability of exclusion clause from Tercon Contractors Ltd. v. British Columbia (Transportation and Highways) 2010 SCC 4[2010] 1 S.C.R. 69. It must be determined if the exclusion clause applies, whether it was unconscionable at the time the agreement was made, and if there is a precedent of overriding public policy to refuse the clause. None of these applied to the circumstance of the appeal case.
- The application judge follows the ruling in Ritchie v. Castlepoint Greybrook Sterling Inc. 2021 ONCA 214, 27 R.P.R (6th) 256, the policy of the Tarion Addendum did not preclude the vendor from limiting its liability to exclude damages incidental on the termination of the contract. The clause applied to the circumstances of the case and there was no public policy reason that would override the exculpatory provision that the parties contracted for. The provisions in the Tarion Addendum allocate the risk of there being a termination of the agreement of purchase and sale. The policy of the Tarion Addendum is to allow the parties to agree to terminations, in which event, the vendor shall refund all monies paid by the Purchaser including deposit(s) and monies for upgrades and extras with interest from the date each amount was paid to the Vendor to the date of refund to the Purchaser. The policy of the Tarion Addendum states that nothing in the Addendum prevents the parties from entering into other termination agreements.
This case reinforces that the limitation of liability clause takes away none of the protections under the Tarion Addendum, but it fixes by agreement the consequences of any default by the vendor in accordance with parties’ freedom of contract. Enforceability requires fact-driven consideration of the particular circumstances of each case. In this case, the limitation of liability of the vendor is limited to a return of the deposits of the purchasers, together with interest in accordance with the applicable legislation. The appeal was dismissed with costs.
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