A financing condition can determine whether a pre-construction project proceeds. In Reddy, purchasers challenged the interpretation of an early termination provision after the cancellation of the Cosmos Towers development.

The agreements permitted termination if satisfactory project financing could not be arranged. The Tarion addendum required the vendors to take all commercially reasonable steps within their power to satisfy the early termination conditions.

The purchasers argued that language giving the vendors “sole, absolute and unfettered discretion” made the financing condition unenforceable.

The court rejected the argument that the entire condition was invalid. It interpreted the agreement consistently with the requirement to take commercially reasonable steps. Any inconsistent language did not give the vendors unrestricted discretion.

Importantly, the proceeding did not determine a factual challenge to the vendors’ good faith or financing efforts; those matters were not in issue. The application concerned contractual interpretation, and it was dismissed.

What this could look like in practice

Suppose a developer announces that construction financing is unavailable and returns purchasers’ deposits. A buyer suspects that the real objective is to relaunch at higher prices.

An initial review would identify the precise condition invoked, its deadline, the notice delivered, and any amendments. The buyer should also preserve communications explaining the cancellation.

The suspicion about a relaunch would need to be distinguished from the contractual question. A lawyer could then assess what evidence exists and whether further investigation into the stated reason is warranted.

The takeaway

A financing condition should be examined within the entire contractual framework. The existence of a termination clause and the developer’s compliance with its obligations are related but distinct issues. Neither should be assessed from the cancellation letter alone.

Contact JY Law to discuss your circumstances and how we may assist you.

The information on this page is provided for general educational purposes only and does not constitute legal advice. These summaries highlight selected principles and do not address every issue or subsequent legal development. Examples are hypothetical and do not predict outcomes. Rights and obligations depend on the agreement, applicable legislation, relevant dates, and particular circumstances. Reading this page or contacting our firm does not, by itself, create a lawyer-client relationship. If you have further questions or require advice about your situation, please contact us.