In Beaudry v. 9091-8665 Québec inc.^[1] (the “Beaudry” decision), the Quebec Court of Appeal has revisited circumstances in which a buyer may be held liable for a broker’s commission after deciding not to proceed with a transaction.

This decision is of interest to buyers, sellers and real estate brokers alike, as it addresses a common situation encountered in practice: a buyer discovers issues during a due diligence review and seeks to rely on an unfulfilled condition of the promise to purchase to annul the transaction.

The Court of Appeal reaffirmed the test of whether the buyer acted reasonably in the circumstances to determine its liability toward the broker.

The circumstances

A broker, having done business with a buyer, obtained from him a letter of intent concerning a property located in Trois-Rivières, which enabled him to solicit and sign a brokerage contract with the seller for the sale of the property. Thereafter, the broker acted as an intermediary, representing both parties, leading to a bilateral promise to purchase.^[2]

The proposals and counter-proposals were made using standard forms provided by the Organisme d’autoréglementation du courtage immobilier du Québec (“OACIQ”). The OACIQ’s promise to purchase standard form includes clauses which allow buyers to make their offer conditional to obtaining financing, carrying out an inspection, and reviewing documents before becoming irrevocably bound.^[3]

However, in an accepted counter-proposal modifying the buyer’s initial promise to purchase, the seller stipulated a due diligence condition, in language drafted by the broker. This provision granted the buyer a 30-day period to conduct various due diligence verifications, as well as an additional 10-day period to give the seller a notice annulling the sale in the event he was not satisfied with the results of the verifications.^[4] Importantly, unlike the standard provisions in the OACIQ form, this custom-drafted provision did not expressly indicate that the notice must be given in writing.^[5]

The due diligence process proved problematic. The broker withheld some of the information and documents provided to him by the seller for the due diligence verifications, which contained relevant information pertaining to lease revenues and building defects.^[6] When the buyer discovered several issues relating to these matters, he verbally notified the broker within the agreed notice period that he would not proceed with the purchase under the agreed terms. The broker never asked the buyer to confirm this decision in writing and, unbeknownst to the buyer, failed to inform the seller.^[7]

After further negotiations proved unsuccessful, by which point the 10-day period to annul the sale had elapsed, the broker asked the buyer to confirm in writing his decision to withdraw from the sale.^[8]

The seller sent a demand letter requiring the buyer to close the transaction but did not ultimately institute proceedings in conveyance of title.^[9] The broker, however, instituted a claim to hold the buyer liable for his commission.

The Superior Court’s decision

The broker argued that he was entitled to claim his commission because the buyer had failed to annul the sale in writing within the 10-day notice period provided under the due diligence provision of the promise to purchase. The broker notably invoked a standard provision contained in the OACIQ forms requiring a buyer to indemnify the broker directly, under the rules of ordinary law, in the event that the sale does not close as a result of the buyer’s fault.^[10]

The Superior Court found that, in the absence of a written notice, the buyer had failed to properly exercise his right to annul the sale, thus concluding the buyer committed a fault that prevented the transaction from closing. The Court therefore ordered the buyer to pay the broker the commission he would have otherwise been paid by the seller under the brokerage agreement.^[11]

The Court of Appeal’s decision

The Court of Appeal, being of the view that the buyer behaved reasonably in the circumstances in deciding not to proceed with the sale, overturned the Superior Court’s decision. In doing so, it clarified the proper test for determining a buyer’s liability for a broker’s commission in similar cases.

The Court reminds that the buyer’s liability towards the broker is extracontractual in nature.  It is important to recall that the brokerage agreement providing for a commission is a contract between the seller and the broker, which does not create obligations for the buyer. Similarly, the promise to purchase is a contract between the seller and buyer, which does not, in principle, create rights in favour of the broker. Thus, the broker can only rely on the general duty, under Article 1457 of the Civil Code of Quebec, to abide by the rules of conduct incumbent on every person so as not to cause injury to another.

Therefore, the question is whether the buyer acted reasonably, comparing his conduct to that of a reasonable buyer placed in the same circumstances.^[12]

Even a breach of a buyer’s contractual obligation towards the seller under the promise to purchase does not automatically establish the buyer’s extracontractual fault towards the broker.^[13] As such, insofar as the broker is concerned, the buyer’s reasons to withdraw from the sale need not be limited to legal grounds allowing for the annulment of the promise, but may include purely personal reasons, so long as these are reasonable.^[14]

Interestingly, the Court noted that the standard OACIQ clause invoked by the broker, requiring buyers to indemnify brokers where a transaction fails to close as a result of the buyer’s fault, does not alter the applicable analytical framework, which remains focused on the reasonableness of the buyer’s conduct.^[15]

In this case, the buyer was not deemed to have committed a fault engaging his liability towards the broker, given the reasonableness of his conduct. Indeed, the buyer had legitimate concerns, further to his due diligence verifications, regarding the profitability and state of the building and was thus justified in deciding not to proceed with the sale. Moreover, the Court felt it was reasonable for the buyer to assume that his verbal notice to the broker of non-fulfilment of the due diligence condition had been communicated to the seller.^[16]

This case also illustrates a situation where the reasonableness of the buyer’s conduct was assessed in light of the broker’s own conduct.^[17] After withholding relevant information from the buyer, the broker did not convey the buyer’s verbal notice of annulment to the seller, nor recommend that it be given in writing. Once the delay to give the notice has lapsed, he asked the buyer to confirm his decision in writing, notwithstanding that the clause he had drafted did not require a written notice. In light of the broker’s behaviour, both the buyer’s decision to annul the sale and the manner in which he gave notice were deemed entirely reasonable.^[18]

Conclusion

The Beaudry decision reaffirms that a buyer’s liability toward a broker is ultimately assessed through the lens of extracontractual liability and the conduct of a reasonable purchaser in the circumstances. Even where a transaction does not close and the contractual formalities between the buyer and seller may not have been strictly observed, liability will not arise automatically. The standard OACIQ clause, stipulating an indemnity payable to a broker where a buyer withdraws from a sale, does not change the applicable analytical framework.

The Court’s analysis remains focused on the reasonableness of the buyer’s conduct, taking into account the surrounding circumstances, including the broker’s own actions.

A clear understanding of the reasonable buyer test, as distinct from an analysis of the buyer’s contractual right to annul a sale, is necessary for buyers, sellers, and brokers alike to navigate real estate transactions and assess their rights and obligations.

[1] 2026 QCCA 571 [Beaudry QCCA]

[2] Beaudry QCCA, supra note 1 at paras 9-18; 9091-8665 Québec inc. c. Beaudry, 2024 QCCS 1969 [Beaudry QCCS] at paras 3-12.

[3] Organisme d’autoréglementation du courtage immobilier du Québec, “Recommended Form Promise to Purchase – immovable” at s 9.1.

[4] Beaudry QCCA, supra note 1 at paras 20-22; Beaudry QCCS, supra note 2 at paras 78-80.

[5] Organisme d’autoréglementation du courtage immobilier du Québec, supra note 3 at s 9.1.

[6] Beaudry QCCA, supra note 1 at para 23.

[7] Ibid at paras 24-30.

[8] Ibid at paras 31-32.

[9] Ibid at para 33.

[10] Ibid at paras 35-36; Organisme d’autoréglementation du courtage immobilier du Québec, supra note 3 at s 7.6.

[11] Beaudry QCCS, supra note 2 at paras 62-64; 75-95.

[12] Beaudry QCCA, supra note 1 at paras 37-39; Benakezouh c. Immeubles Henry Ho, 2003 CanLII 41798 (QC CA) at paras 22-25; Ibrahim c. Groupe Sutton Immobilia inc., 2008 QCCA 2379 at paras 30, 35-38 [Ibrahim]; Société en nom collectif Immobilier 2000 c. Immobilier Estrie inc., 2012 QCCA 1826 [Immobilier Estrie inc]

[13] Beaudry QCCA, supra note 1 at paras 41, 43-44; Immobilier Estrie inc., supra note 12 at para. 28, citing Ibrahim, supra note 12 at para 34.

[14] Beaudry QCCA, supra note 1 at paras 43-44.

[15] Beaudry QCCA, supra note 1 at para 40; Organisme d’autoréglementation du courtage immobilier du Québec, supra note 3 at s 7.6; Indeed, the clause itself provides that liability is determined according to the “ordinary rules of law”, meaning the rules of extracontractual liability continue to apply.

[16] Beaudry QCCA, supra note 1 at paras 46-56.

[17] Beaudry QCCA, supra note 1 at para 37.

[18] Beaudry QCCA, supra note 1 at paras 52-56.