Breach of Agreement of Purchase and Sale in Ontario: What It Means and What to Do

When a buyer and seller sign an Agreement of Purchase and Sale (APS) in Ontario, they enter a legally binding contract. A breach of the Agreement of Purchase and Sale occurs when one party fails to fulfill a material obligation under that contract — most often, by not completing the transaction on the agreed closing date. But breaches can happen in other ways too: a seller who lets the property fall into disrepair before closing, a buyer who misrepresents their mortgage approval, or either party who tries to impose new conditions after signing.

Understanding what constitutes a breach — and what it triggers — helps you protect your rights whether you're the party who was left hanging or the one trying to justify why the deal fell apart.

What Is an Agreement of Purchase and Sale?

An APS is the binding contract that governs a residential real estate transaction in Ontario. Once all conditions are either satisfied or waived, the APS becomes firm — neither party can walk away without legal consequence. Key elements include:

• The parties, the property, and the purchase price
• The closing date and any adjustments
• Conditions (financing, home inspection, sale of the buyer's home) with specific deadlines
• Deposit terms
• Representations and warranties about the property's condition
• Inclusions and exclusions

Each of these elements carries obligations. A failure to meet any material obligation is potentially a breach.

Types of Breach

Failure to Close (Anticipatory or Actual)

The most common breach is simply not showing up for closing. An actual breach occurs on the closing date itself when the funds don't arrive or the documents don't flow. An anticipatory breach occurs earlier — when one party makes it clear in advance (through words or conduct) that they will not be completing the transaction.

If a buyer sends an email three days before closing saying "we're not buying, we found somewhere else," that is anticipatory breach. The non-breaching party can treat the contract as terminated immediately and sue without waiting for the closing date to come and go.

Failure to Satisfy Conditions Properly

Conditions are not automatic escape hatches. A buyer who includes a home inspection condition cannot use a pretextual "failed inspection" to exit a deal they simply changed their mind about. Courts in Ontario have scrutinized buyers who act in bad faith when exercising condition rights. If a buyer uses a condition as a pretext to exit without a genuine substantive basis, that can itself be a breach.

Breach of Representations and Warranties

The APS typically contains the seller's representations: that the property will be in the same condition on closing as on the date of signing, that there are no undisclosed environmental issues, that all permits are in order. If the seller fails to meet these, that is a breach — even if the seller closes on time.

Failure to Deliver Clear Title

A seller must be able to transfer clear title on closing (subject to disclosed encumbrances). If the seller has an unexpected lien, an encroachment discovered by survey, or a title problem they cannot resolve before closing, this is a breach. The buyer is entitled to a short extension to give the seller a reasonable opportunity to cure the defect — but if they cannot, the buyer can walk away and claim damages.

Consequences of Breach

For the Breaching Buyer

• Deposit forfeiture: the seller is typically entitled to keep the deposit
• Damages: the seller can sue for all losses that flow naturally from the breach — carrying costs, re-listing costs, the gap between the original price and the eventual re-sale price
• Both: forfeiture and damages are not mutually exclusive; the deposit is credited against damages

For the Breaching Seller

• Deposit return: the buyer is entitled to the full return of their deposit
• Specific performance: a court can order the seller to complete the sale
• Damages: the buyer can claim the gap between the agreed price and the cost of a comparable replacement property, plus wasted costs

For the Non-Breaching Party: Duty to Mitigate

Both buyers and sellers who suffer a breach are required to mitigate their losses — to take reasonable steps to minimize the financial impact. A seller who refuses to re-list, or a buyer who turns down a comparable replacement property out of spite, may find their damages reduced by the amount they could have recovered through reasonable mitigation.

When Is a Breach Excused?

Occasionally a party argues that performance was impossible or that the contract was frustrated. The doctrine of frustration applies when an unforeseen event — beyond the control of either party — makes performance radically different from what was contracted. Courts set a high bar for frustration; it is not enough that performance became harder or more expensive. A buyer who simply cannot get a mortgage (after waiving a financing condition) has not frustrated the contract.

A genuine government-imposed prohibition on completing the transaction, or the unexpected destruction of the property before closing, might qualify. Individual financial hardship typically does not.

Steps to Take When a Breach Occurs

1. Document the breach immediately: confirm it in writing through your lawyer
2. Confirm your own readiness to perform (critical for the non-breaching party)
3. Issue a formal notice of default
4. Begin mitigation — re-list, or search for a replacement property
5. Preserve evidence: appraisals, carrying cost records, correspondence
6. Get legal advice before signing any extension or mutual release

Frequently asked questions