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Promise To Purchase (What Is It And How It Works: Overview)

What is a Promise To Purchase?

How does it work under Quebec laws?

What are the essential elements you should know!

Keep reading as we have gathered exactly the information that you need!

Let’s dig into our Quebec legal knowledge!

Are you ready?

Let’s get started!

What Is A Promise To Purchase In Quebec

A promise to purchase (“promesse d’achat” in Quebec) is a legal agreement where one party (the promisor) promises to purchase property from the other party (the promisee).

For instance, in the context of a real estate transaction, a promise to purchase is a contract signed between the buyer and a seller of a real estate property.

The promisor agrees to buy the home or real estate property and the seller agrees to sell the same.

The promise to purchase agreement will generally contain the terms and conditions related to the sale.

For example, if the buyer needs bank financing before being able to purchase another’s real estate property, the financing could be presented as a purchase condition.

Once all the conditions in the promise to purchase are satisfied, then the contract becomes enforceable and legally binding.

Promise To Purchase Steps

It’s important that you read the promise to purchase to ensure that you have a good understanding of the terms and conditions you are legally committing yourself to.

The first step is to negotiate the terms and conditions of the promise to purchase.

For example, in the case of the purchase of a home, the buyer will first need to agree on the purchase price with the seller.

Once the purchase price is agreed, the buyer and seller can include any other conditions relevant to the transaction.

It is quite usual to see buyers include a financing and inspection condition before firmly agreeing to purchase a real estate property.

The second step is to ensure that all the conditions outlined in the promise to purchase are satisfied or realized.

If a buyer agreed to get financing, he or she must do what’s necessary to get financing from the bank.

Finally, once all the conditions are satisfied, the final step is for the buyer to pay the purchase price and the seller to deliver the property.

In the context of a real estate transaction in the province of Quebec, that’s typically done with the assistance of a notary.

Content of Promise to Purchase

According to the Civil Code of Quebec, the parties are free to draft a promise to purchase in any form they are comfortable with.

The law does not require the contract to be notarized, witnessed, or impose any other formation rules.

However, there are many instances where we may see “templates” or “forms” used when dealing with a promise to purchase.

For example, in the context of real estate transactions, certain organizations like Garantie de construction résidentielle (GCR) and other organizations may impose a specific form to be used.

For example, a template may include the following sections:

  • Identification of the parties
  • Description of the transaction (object of the promise)
  • Description of the real estate property (immovable property)
  • Purchase price
  • Payment method 
  • Seller’s declarations
  • Buyer’s declarations
  • Inspection condition requirement 
  • Financing condition requirement 
  • Warranties 
  • Closing date 
  • Occupancy or possession date 
  • Inclusions and exclusions 
  • Title search 
  • Delays to accept the promise to purchase 
  • Signatures
  • Date 

Relevant Articles In The Civil Code of Quebec 

In Quebec, the Civil Code of Quebec has several provisions dealing with a “promise” or “promise to contract”.

Article 1396 CCQ states that an offer to contract made to a person constitutes a “promise to enter into the proposed contract” when the other person accepts the offer.

Article 1415 CCQ states that a promise to enter into a contract does not have to comply with a specific form or requirements.

Article 1710 CCQ states that a promise to sell property followed by the actual possession of the property is equivalent to the actual sale. 

Article 1785 CCQ states that the sale of a residential property by a builder or developer to an individual must be preceded by a “preliminary contract”.

The Civil Code defines the elements and requirements to satisfy with respect to preliminary contracts in an attempt to protect home buyers from builders, entrepreneurs, and developers. 

Execution in Good Faith

In Quebec law, the Civil Code of Quebec establishes that a person must exercise its rights and execute its legal duties in good faith.

Good faith” means that a person acts honestly, discloses truthful information, and avoids acting in a prejudicial manner towards the other party.

For example, in the context of a real estate transaction, the seller should truthfully disclose the state of repair of the property to the buyer so he or she can make an informed decision as to the fair price to pay to purchase the same.

The buyer should truthfully disclose his or her capacity to get financing to purchase the property.

Cancelling Promise To Purchase

There are instances that a party may want to cancel the promise to purchase.

It’s important to remember that a promise to purchase is a legally binding contract and before signing a promise, it’s important to consult with a qualified lawyer or notary.

If a promise to purchase includes clauses giving a party the right to cancel the agreement, that’s one way you may seek the cancellation of the contract.

However, if there are no specific clauses mutually agreed upon describing the cancelation rights and its process, then the contract may be cancelled to the extent there’s a violation of the law.

For example, if a person signing the promise to purchase did not have legal capacity being a minor, then the contract may be declared null (absolute nullity).

Another instance is when a party misrepresented essential elements of the contract inducing the other party to contract on terms and conditions he or she would not have agreed to.

Keep in mind that in the event the parties do not agree on the contract cancellation, the person seeking to cancel the contract must file a lawsuit and demand the cancellation from the court.

As the plaintiff, the claiming party has the burden to prove that there are legal grounds allowing it to cancel the contract.

Takeaways 

So what is the legal definition of Promise To Purchase?

Let’s look at a summary of our findings.

Promise To Purchase Meaning

  • A promise to purchase is a legally binding agreement between the promisor (party making the promise to the other) and the promisee (party receiving the promise)
  • It can relate to the sale of movable goods (equipement, inventory, products, etc) or immovable properties (house, industrial property, condo, duplex, etc)
  • The promise to purchase will generally contain the terms and conditions related to the sale such as identification of the parties, description of the property presented for sale, purchase price, delivery date and method, purchase conditions, and any other relevant terms 
  • A promise to purchase is a legally binding contract just like any other contracts and so it may not be easy to back out of a binding promise
Acceptance 
Contract lawyer 
Instrumenting notary 
Legal capacity 
Localization certificate 
Notice of claim 
Offer 
Preliminary contract 
Property inspection 
Sale warranties
Author
Building Act 
Contractual obligations 
End of work 
Garantie de construction résidentielle 
Land registry 
Latent defect 
Legal hypothec 
Real estate lawyer 
Sale contract 
Specific performance 
Title search
Author

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