Background
In March 2016, the respondents — Gurdeep Chitchot, Manjit Chitchot, and Sekha Construction Ltd. — each entered identical contracts of purchase and sale with the appellant developer, 0998823 B.C. Ltd., to purchase lots in a planned 32-lot subdivision in Abbotsford, British Columbia. The original contracts set a completion date of December 31, 2016, or 30 days after the developer gave notice that certain milestones had been reached, including that the City of Abbotsford would accept building permit applications. The contracts also allowed the developer to extend the completion date by up to six months, and provided that if the condition precedent was not met by the completion (or revised completion) date, the agreement would terminate and deposits would be refunded.
In July 2017, the parties executed a Second Addendum that revised the completion date to “30 days from the date the City of Abbotsford accepts the building permit applications for the Property,” without specifying any outside deadline. The developer contended this meant the contracts would terminate by effluxion of time if the condition precedent was not met within a reasonable period — which it said was by December 2018. The respondents disagreed, commencing litigation in 2021 alleging anticipatory breach, and claiming specific performance on the basis that the contracts remained valid and subsisting.
It was not until March 2024 that the City of Abbotsford confirmed it would begin accepting building permit applications. The developer did not complete the transactions within 30 days. The respondents then abandoned their specific performance claims and sought damages instead. At summary trial, the Supreme Court of British Columbia found that the Second Addendum created an open-ended completion date triggered only upon the City’s acceptance of permit applications, that no implied term limited that period to a reasonable time, and that the developer’s failure to complete in April 2024 was a breach of contract.
The Court’s Holding
The Court of Appeal, in reasons written by Harris J.A. (DeWitt-Van Oosten and Winteringham JJ.A. concurring), allowed the appeals, set aside the trial orders, and directed new trials. The court identified three extricable legal errors in the trial judge’s approach to contractual interpretation, each of which undermined the factual and legal foundation for her conclusion that the contracts remained in force and were breached in April 2024.
First, the trial judge erred in law by holding that the doctrine of implied terms operates only to protect buyers, and therefore could not be invoked by a seller seeking to imply a reasonable-time limitation. The court reaffirmed that implied terms exist to give effect to the objective intentions of both parties at the time of contracting — not to protect one party in particular — and that rejecting the implied term analysis on this basis was a misapplication of settled principle. Second, although the judge correctly stated the need to interpret contracts in their factual matrix, she failed to do so, examining the words of the Second Addendum in isolation rather than against the background circumstances known to the parties at the time — including the Amended Disclosure Statement, which contemplated an end date and termination mechanism. Third, the judge improperly relied on the parties’ post-contract conduct to interpret the agreements without first finding the contracts to be ambiguous, contrary to established Canadian law requiring that such evidence be admitted only where ambiguity persists after examining the text and surrounding circumstances at formation.
The court declined to undertake the correct contractual interpretation itself, noting that doing so would place it in the role of a court of first instance and require weighing evidence more appropriately assessed at trial. The court also noted unresolved questions — including whether time was of the essence and whether the respondents had demonstrated readiness, willingness, and ability to complete — that required consideration on remand.
Key Takeaways
- The doctrine of implied terms is not limited to protecting buyers in real estate contracts; courts must assess whether a term should be implied based on the objective intentions of both parties, applying the business efficacy and officious bystander tests.
- Contractual interpretation requires examining the words of a contract in the factual matrix existing at the time of formation — not in isolation — and non-contractual documents such as disclosure statements may form part of that matrix even if they lack direct contractual force.
- Post-contract conduct may only be used as an interpretive aid after the contract has been found ambiguous following analysis of its text and surrounding circumstances; using it without that predicate finding is a reviewable legal error.
- In real estate transactions where a completion date is found to have passed and breach is alleged, courts must also address whether time was of the essence and whether the claimant was ready, willing, and able to perform before liability can be established.
Why It Matters
This decision is a significant reminder for practitioners drafting real estate contracts that open-ended condition precedents — particularly those tied to municipal approvals outside either party’s direct control — create substantial uncertainty about contract duration. Where no outside deadline is specified, the question of whether a reasonable-time limitation should be implied is a live legal issue requiring rigorous analysis under established implied-terms principles, not a shortcut determination based on which party stands to benefit.
The case also reinforces British Columbia appellate courts’ strict gatekeeping on the use of post-contractual conduct in interpretation: the boundary between permissible surrounding circumstances (objective background facts at formation) and impermissible subsequent conduct remains a recurring source of trial error, and counsel should ensure the record supports a finding of ambiguity before inviting courts to rely on what the parties did after signing.