sept. 21. 2020

B.C. Court Upholds Contract Requiring One Party to Leave Estate to Other Parties

Munro v James, 2020 BCSC 1348 (CanLII)

What if you enter into an agreement with someone, for example to provide them with services, based on a promise from that person that they will leave something to you in their will, but then you find out that the person has made a new will which makes no provision for you? Is the agreement enforceable, and do you have to wait until after the person’s death to take steps to enforce your rights?

This issue arose in the recent case of Munro v. James 2020 BCSC 1348. In Munro, the parties were acquaintances in the equestrian community. Ms. James (one of the defendants) owned a large farm property which included ponies. In 2007, the parties entered into an agreement whereby the plaintiffs would move onto Ms. James’ farm, build a home there, and look after Ms. James’ ponies for the remainder of her life. In exchange, the plaintiffs were to inherit Ms. James’ estate when she died. The agreement was put in writing.

In 2017, Ms. James made a new will that left her entire estate to another acquaintance, instead of the plaintiffs. In 2018, Ms. James sought to terminate the agreement on the bases that the plaintiffs breached their obligations. The plaintiffs sued.

The judge did not accept that the plaintiffs had breached the agreement in any of the numerous ways alleged by Ms. James. The agreement remained in force and Ms. James was not entitled to terminate it. The plaintiffs were able to sue for “anticipatory breach”, where a party repudiates their contractual obligation before it falls due. In other words, the plaintiffs did not have to wait until Ms. James’ death before they brought an action. By changing her will to exclude the plaintiffs, she rejected the obligations of the contract and the plaintiffs were entitled to sue immediately.

The next issue was the remedy. The plaintiffs (as the non-defaulting party) had the right to elect as to whether to treat the contract as continuing (and they may seek specific performance – requiring Ms. James to fulfill her obligations under the agreement) or as ended (and sue for damages).

In this case, the plaintiffs did not accept the repudiation and wanted the contract to continue. The Court had to figure out the appropriate remedy for the unusual circumstance where Ms. James failed to fulfill a term that upon her death, the plaintiffs would inherit her estate but Ms. James was still alive.

The Court ordered that the entire residue of Ms. James’ estate on her death, after payment of taxes and reasonable funeral and testamentary expenses, is payable to the plaintiffs. Further, Ms. James was not to dispose of or encumber the farm property without the consent of the plaintiffs or a court order. The plaintiffs were no longer obligated to perform services on the farm property pursuant to the agreement.

The Munro case is a good reminder that you should think carefully before entering into an agreement with a term requiring you to make a will to benefit another person. As long as the other elements of a contract are present (i.e. offer, acceptance, consideration, etc…), this type of agreement is enforceable in B.C., and you may be put in the unpleasant situation of losing any testamentary autonomy to decide what will happen to your estate. Further, the party expecting to benefit from such an agreement does not have to wait until your death before commencing an action, if the beneficiary becomes aware that you no longer intend to abide by the terms of the agreement.

[This post by James Zaitsoff first appeared on the BC Estate Litigation Blog on September 16, 2020]