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- Chapter 17 - Conditional Agreements
C. Implied Subsidiary Obligations
Author | John D. McCamus |
Profession | Professor of Law. Osgoode Hall Law School, York University |
Pages | 679-681 |
Page 679
Where an agreement is subject to a non-promissory condition precedent, such as being conditional upon the approval of a third party, courts will often imply subsidiary promissory obligations on the part of one or both of the parties. One reason for doing so is to give effect to the reasonable expectations of the parties as to how the condition may be fulfilled. In the leading case of Dynamic Transport Ltd. v. O.K. Detailing
Page 680
Ltd.,25for example, a transaction for the purchase and sale of land was subject to a condition precedent that the parcel to be transferred be subdivided from the parcel of which it then formed a part. When the purchaser sought specific performance of the agreement, the vendor defended on the basis that subdivision approval had not been obtained and, further, that the agreement was silent as to whether it was the vendor or purchaser who should obtain this approval. The Supreme Court of Canada held that a court will "readily imply"26a promise on the part of each party to do all that is necessary to facilitate or cooperate in the fulfilment of the condition in a contract of this kind. With respect to the determination of which of the parties had the burden of going forward with an application for subdivision, the Court noted that the applicable planning legislation stipulated that the person who proposed to subdivide the property had the burden of applying for permission. Accordingly, the Court concluded that it was the vendor who was under an implied duty to make the appropriate application. Similarly, in Smallman v. Smallman,27where a separation agreement was "subject to the approval in due course of the court," the parties were subject to an implied obligation to seek court approval. Sometimes, the subsidiary obligation is said to be one imposing a duty to exercise "due diligence" in seeking fulfilment of the condition precedent.28The implied duty to cooperate may include an obligation to provide financial statements where the request for the information is a reasonable one.29
In these cases, parties who are subject to the implied promise to facilitate or cooperate in the fulfilment of the condition precedent will be in breach of contract should they fail to do so and subject, therefore, to the normal remedies for breach of contract.30Another reason for implying undertakings that are subsidiary to the condition precedent is to impose a contractual obligation on one or both parties to refrain from...
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