THE FORFEITURE OF RESOLUTORY CLAUSES IN PROPERTY SALES CONTRACTS
The resolutory right is a common guarantee withing the framework of the balance of sale price during an acquisition. It is often used to secure a non-monetary obligation of the buyer. This right is granted to the seller and gives him the right to request the resolution of the sale of an immovable in the event that the buyer is in default of performing one of his secured obligations.[1]
If such a right is granted within the deed of sale, the seller will have a delay of five (5) years following the sale to avail himself of his resolutory clause.[2] Since this period is of public order, the buyer cannot renounce his benefit of the forfeiture of term in favor of the seller.[3]
Additionally, this period cannot be interrupted or suspended since it is not a prescription delay but rather a forfeiture delay. Indeed, although the expression “period of forfeiture” is not found in the wording of the Civil Code of Québec, this does not allow the interruption or suspension of the five-year period, as confirmed by the courts.[4]
In that respect, the judge, in Roussel v. Créations Marcel Therrien inc., 2011 QCCA 496, adds that:
« [TRANSLATION] From a practical point of view, there are also compelling reasons for considering the five-year limit for invoking a resolution clause as a forfeiture period. The stability of real estate transactions is undoubtedly the reason why a maximum term is imposed. However, the possibility of interrupting this period could easily destroy the efforts of the legislator in this area. »
Finally, the decision Québec (Procureur général) v. Mascouche (Ville de), 2012 QCCA 1099, cited in several other case law and doctrine articles, summarizes the scope of article 1742 C.c.Q. as well as the comments mentioned above.
« [TRANSLATION] The rule set out in article 1742 C.c.Q. therefore applies, since January 1st, 1994, to the exercise of the right conferred to the seller by the resolutory clause in the event of default by the buyer to perform one or other of his obligations. However, this right must be exercised within five years of the sale, under penalty of forfeiture. »
such, it becomes paramount to review and analyze the buyer’s obligations guaranteed by the resolutory right so that the seller is assured that the term of the guaranteed obligations is less than this statutory period of five (5) years and, by extension, that he will be able to exercise his rights in the event of default.
By Audrey Robitaille and Marie-Laurence La Roche
[1] Code civil du Québec, RLRQ, c. C-1991, article 1742.; Québec (Procureur général) c. <em> Mascouche (Ville de)</em>, 2012 QCCA 1099
[2] Id.
[3] KARIM, V., Les obligations, vol. 2, 5e éd., Montréal, Wilson & Lafleur, 2020, p. 807.
[4] Roussel c. Créations Marcel Therrien inc., 2011 QCCA 496.