Can You Back Out of a Signed Purchase Contract in Alberta?

Second thoughts after signing are common. Maybe your financing looks shaky, the inspection turned up problems, or you simply feel you moved too fast. The key question is whether the contract gives you a way out.

Whether you can back out of a signed purchase contract depends on what the contract says, including its conditions, so it is worth reading it closely and confirming with a lawyer. Leaving it safely usually depends on a condition you can rely on, or on an agreement with the other side. Walking away without either is risky, and how it plays out depends on your contract and your situation, so it is worth confirming with a lawyer.

This article covers the law of Alberta.

A signed contract is a commitment

Signing a contract is a serious step, and you should not assume you can cancel just because you changed your mind. How this applies depends on your situation, so it is worth confirming with a lawyer.

What matters is what your contract says. Conditions, deadlines and any added clauses are the place to look for your options, and the time you have depends on your signed contract.

When a condition may give you a way out

It is not unusual for a residential purchase contract to include a home inspection as a condition. After an inspection, a buyer may withdraw the offer, adjust the price to cover repairs needed, or move forward. Whether you can withdraw, and how, turns on the exact wording and dates of the condition.

• Inspection condition: see the wording for how and by when to give notice.
• Financing condition: the contract sets out the financing terms, and how a financing condition ends depends on its wording.
• Condo documents condition: the corporation must provide an estoppel certificate within 10 days of a written request, so the request should be made early enough to fit your condition period.

If a condition is not satisfied or ended properly by its deadline, you may lose the ability to rely on it. Keep written records of every notice you give.

What happens to the deposit

A brokerage holding a deposit cannot release it on its own say-so. Trust money may be paid out only in accordance with the Rules and the terms of the trust, and those terms must be in writing and agreed to by the licensee and all other parties. Any waiver or release of these trust-account duties by the person the licensee acts for is void.

Whether a deposit is returned or kept when a buyer backs out depends on the contract and on court decisions, not on a simple statutory rule. A lawyer can tell you how this applies to your situation.

Risks of simply walking away

Walking away without a condition or agreement that allows it can lead to a dispute with the other side, including over the deposit. How far that goes depends on your contract's wording and your situation, so it is worth confirming with a lawyer.

A claim, for example for breach of a purchase contract or return of a deposit, must be brought within 2 years after the claimant first knew, or ought to have known, of it, or 10 years after the claim arose, whichever expires first. Other provisions may also affect a claim, so the specific facts matter.

What to do next

• Reread the contract and list every condition and its deadline.
• Do not miss a condition date while you decide.
• Give any notice in writing, following the contract's wording.
• Do not stop communicating with your agent or the other side without advice.
• Talk to a lawyer before you decide to walk away, especially if a deposit is at stake.

If both sides want to end the deal, a written agreement that deals with the deposit is generally safer than a verbal one, since trust money is paid out only under written terms.

Frequently asked questions