"Agreement of Purchase and Sale" (Successors and Assigns)
By Brian Madigan LL.B.
(Ontario Real Estate Source)
The Successors and Assigns clause is a traditional provision that has been included in agreements for hundreds of years.
Let's have a look at the standard form agreement of purchase and sale and see what it says in the "Successors and Assigns" clause:
"28. SUCCESSORS AND ASSIGNS: The heirs, executors, administrators, successors and assigns of the undersigned are bound by the terms herein."
Let's have a look at each line, thought, or partial sentence by a letter of the alphabet for later review:
28. SUCCESSORS AND ASSIGNS:
A) The heirs,
B) executors,
C) administrators,
D) successors and
E) assigns
F) of the undersigned
G) are bound by the terms herein.
So, now let's have a look at each of the sentences or partial sentences and see what we come up with.
A) The heirs,
This is a provision designed to make some third parties equally responsible for the performance of the agreement as the parties who have actually signed the agreement, namely the seller and the buyer.
You will appreciate that no one can truly "bind" their heirs to an agreement. All that can really be done here is to ensure that the heirs, should they elect to affirm the contract, are bound by its terms.
B) executors,
The concept of executors is a little different. A person may truly "bind" their own executors to an agreement. There is no option of affirmation here. In this case, the party is deceased. An executor takes authority immediately upon death from the powers provided to them under the terms of the Will.
In Ontario, the correct term is "Estate Trustee". For some reason, that expression was not used in this agreement. The term executors is a well known, and well accepted concept that has been used for hundreds of years in common law jurisdictions.
An application for "probate", that is, a court order which approves of the Will and declares this document "probated" to be in fact, the last Will and testament of the deceased cannot be made until 7 days after the date of death.
In Ontario, such an appointment is now, the appointment of an "Estate Trustee with a Will"
C) administrators,
Not everyone who dies has made a Will. The long term common law expression for someone who looks after an estate of a deceased person who dies without a Will, is an administrator. Like the term executor, "administrator" is well known and well accepted.
In Ontario, such a person would make application to the Court and would be appointed as the "Estate Trustee without a Will". The term "administrator is not used.
When it comes to administrators, there are appointments made that do not require the person to be deceased. Appointments can be made in respect to those who are bankrupt, or insolvent. Under other statutes, appointments can be made in respect to those who are incompetent.
This particular paragraph is intended to be generic and apply to many different jurisdictions and not just Ontario. It would be the laws related to the residency of the individual that would generally apply.
D) successors and
Successors simply means "those who follow". The intention here is to bring into the paragraph, all those who might follow suit. So, those acting under a power of attorney would be covered. Those acting who in some way have acquired the interest in the agreement by operation law are intended to be covered.
Let's consider the case of two joint owners of a property who enter into an agreement to convey to a purchaser. One owner dies. The second owner acquires the deceased party's interest by right of survivorship. This does not entitle the survivor to void the contract. On the contrary, the surviving joint tenant is obligated to complete the transaction.
Not all parties are natural persons. Many are corporations or partnership. The successor corporation or partnership is still bound by the terms of the agreement.
E) assigns
Assigns suggests a contractual assignment in favour of a third party. If there is such an assignment then the third party is bound. There may be a provision in the agreement which:
· Permits assignment
· Permits assignment with approval, or
· Prevents assignment
These other terms need to be applied as well.
F) of the undersigned
This covers the sellers, the buyers, and any third party guarantors, or third party covenantors like spouses consenting pursuant to the Family Law Act.
G) are bound by the terms herein.
This is the consequence. They are bound in the same way to the contract, just as if they had signed it themselves.
Comment
The "Successors and Assigns" clause is designed to leave the risk of death, incapacity, insolvency and bankruptcy with the party who suffered such event, rather than shifting such a risk to the other party to the agreement.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage
905-796-8888
www.OntarioRealEstateSource.com
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