Q: I am from Saskatchewan. My neighbour and I had a gentleman’s agreement and shook hands on it. About 18 months ago, I agreed to buy a half section of his land. I had to sell some assets first and needed time. I now have the money and approached him to finish the deal, but he refused. He said land prices had gone up so he wanted more money. I want to buy it at what we agreed. What can I do?
A: This sort of thing is common in a rising market. In Saskatchewan, the economy has boomed over the last three or four years, and this has now affected our rural land prices.
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I understand why you want to buy this land at the price agreed on 18 months ago. I also have no doubt the value of that land has increased and that your neighbour could get more money.
The lack of any written agreement creates big legal problems for you. In many provinces in Canada, the law says an agreement to dispose of or transfer land must be in writing.
This is rooted in English law from hundreds of years ago.
Historically, land could be transferred by verbal arrangements. In post-feudal times, it was found this was leading to disputes, because the versions of the arrangements varied depending on who was speaking.
Sometimes, the courts accepted land claims that later were shown to be false. As a result, in 1677 a law was passed that is commonly known as the statute of frauds. This provided that any contract that was intended to deal with land had to be in writing. Oral agreements pertaining to land would not be enforced by the courts.
To satisfy the law in this area, a contract has to be written but does not have to be complex or elaborate. Only the essential terms must be set out. These would include the location or description of the land in question, sufficient so as to identify that land. The names and identities of the seller and buyer must be listed. A price must be set down. It must be signed by the parties.
It is advisable to have a date for payment and transfer in writing, but that is not an absolute requirement. It doesn’t need to be fancy or in complicated language and you don’t necessarily even need lawyers involved. If these basics are met, you have an enforceable contract, even if it’s written on a napkin.
There are very limited exceptions to the statute of frauds. One notable one is part performance. If you can prove that both you and the other side partially performed the verbal contract on land, or at least took steps to alter your position that tends to indicate both sides were acting on the basis of that verbal contract, you may be able to enforce it.
In your case, unfortunately, I think that is doubtful. There could have been many reasons for you to sell assets to raise the money to buy the land.
Unless you can show the assets were being sold to generate the purchase price, and there could be no other reason, you are sunk.
Even that may not be enough. Your situation is precisely what this law was designed to fix – a verbal agreement over land may or may not have been reached, but it is impossible to tell which side is telling the truth.
Without having even the most basic of written documents to record and protect your land transaction, you are likely not going to be allowed to try to sue to enforce your sale agreement.
I know this is hard news, but this law has a long history of recognition in Canada and it is extremely doubtful it will be bent to accommodate you.
Rick Danyliuk is a practising lawyer in Saskatoon with McDougall Gauley LLP. He also has experience in teaching and writing about legal issues. His columns are intended as general advice only. Individuals are encouraged to seek other opinions and/or personal counsel when dealing with legal matters.
