Executive Summary
A March 2026 decision from the Ontario Superior Court of Justice offers a sharp reminder for transactional real estate lawyers: the absence of initials on a modified contract clause does not necessarily invalidate that clause. In Potz v. Pietrangelo, 2026 ONSC 1405, Associate Justice Mak granted summary judgment in favour of the vendor, awarding over $76,000 in damages after a purchaser failed to close — and the purchaser’s entire defence rested on a clause that was never initialed.
Background
On October 28, 2021, the vendor agreed to sell a residential property in Innisfil, Ontario for $645,000, with a closing date of August 2, 2022.
An earlier version of the Agreement of Purchase and Sale (APS), signed only by the original purchaser, allowed the buyer to advance the closing date by up to 120 days upon 20 days’ written notice. However, the version ultimately signed by both parties included an additional phrase: “Must be mutually agreed upon by both Seller and Buyer.” This modification appeared in a different font and size, and was not initialed by either party.
The agreement was later amended to add a co-purchaser, who eventually became the sole purchaser. She executed two subsequent amendments, each confirming that all other terms and conditions remained unchanged.
When market conditions shifted, the purchaser sought to advance the closing date, reduce the purchase price, and extend closing. The vendor refused.
When the purchaser failed to close, the property was re-listed and sold at a lower price, prompting the vendor’s claim for damages.
Key Legal Issue
The central issue before the Court was straightforward: Which version of the APS governed—the earlier signed version without the added clause, or the later fully executed version containing the uninitialed modification?
Court’s Analysis
The Court applied an objective approach to contract formation, focusing on whether a reasonable person would conclude that the parties intended to be bound by the signed agreement.
- Full Signatures Prevail Over Missing Initials
The Court emphasized that both parties signed the version of the APS containing the added clause. This carried significant legal weight. The absence of initials did not negate the clause, particularly where the agreement itself was fully executed.
- Subsequent Amendments Confirmed the Terms
The purchaser signed two amendments, each affirming that all other terms remained unchanged. This conduct constituted ratification of the agreement, including the disputed clause.
- No Timely Objection
There was no evidence that the purchaser objected to the clause prior to the closing date. The purchaser’s silence, combined with subsequent conduct, supported the conclusion that the clause formed part of the binding agreement.
- Regulatory Findings Were Not Determinative
The purchaser relied on findings from the Real Estate Council of Ontario (RECO) regarding the agent’s failure to obtain initials. The Court held that such findings relate only to professional conduct. The findings did not relate to contractual validity and are not binding in civil proceedings.
Damages Awarded
The Court awarded damages totaling $76,965.12, consisting of $93,000 for the difference between the original and subsequent sale price; $3,965.12 in carrying costs (mortgage, utilities, insurance, and internet); and less the $20,000 deposit.
The Court, however, rejected the vendor’s claim for lost Airbnb income. Had the agreement closed as agreed, there would have been no property to rent out. Awarding that income would have put him in a better position than performance of the contract, which is inconsistent with the fundamental compensatory principle in damages.
Key Takeaways for Practitioners
- Missing Initials Do Not Necessarily Invalidate Clauses
A clause may remain enforceable despite the absence of initials where the agreement is signed and the parties’ conduct supports its inclusion.
- Amendments Can Lock in Disputed Terms
Standard amendment language confirming that “all other terms remain the same” may operate as a ratification of earlier provisions.
- Conduct Matters
Courts will assess how parties behave after signing. Silence and continued performance can confirm contractual intent.
- Regulatory Decisions Are Not Dispositive
Findings by regulatory bodies do not determine contractual rights or obligations in civil litigation.
- Purchasers Bear Real Risk in Failing to Close
Absent a valid contractual basis, failure to close can expose purchasers to substantial liability for price differentials and carrying costs.
- Review Before Signing, Including Amendments
Parties, particularly sophisticated ones, will be held to the agreements they execute. Failure to review documents is not a defence.
Conclusion
Potz v. Pietrangelo underscores the fundamental principle of contract law that courts must prioritize substance over form. Even where drafting irregularities exist, signed agreements, reinforced by subsequent conduct, will be enforced according to their terms. For transactional lawyers, the message is clear: every word in an APS matters, whether initialed or not.
