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Wednesday, May 10, 2017

Court finds farm lease not signed under duress - owner ordered to pay lost profits

In the fall of 2011, a couple of farmers ("D&S") asked an area landowner ("H") whether she would lease her farmland to them.  After a couple of meetings, H agreed to lease the land for three years at a set rental amount.  However, a few months later in April, 2012, on the day set by D&S to begin field operations on the rented land and a couple of days after D&S had provided H with a draft written lease, H blocked her driveway to prevent D&S from entering the land.  The OPP was called; the parties discussed the situation and made several changes to the draft lease at H's request, and the lease was signed.

In December, 2012, according to D&S, H then unlawfully terminated the lease.  D&S sued her for loss of profits that they would have earned had they been able to farm H's land during the two years remaining on the lease.  In her defence, H pleaded that she had signed the lease (on the day in April, 2012 when the OPP attended at her property) under duress.  In addition, H pleaded that D&S had breached the terms of the lease, which entitled her to terminate it.  At trial, Justice Bale rejected both defences and awarded D&S damages of just over $64,000 for lost profits.

Justice Bale did not accept the plea of duress because the presence of the OPP at the property (although the officers were called by D&S) was for H's benefit as well; H had already agreed to the material terms of the lease even before the written agreement was made in April, 2012; the only changes made to the lease agreement that day were changes that were requested by H; H testified that she though she was only signing a one-year lease that day, which she could put up with, but that demonstrates that she was signing the lease voluntarily (and, in any event, the judge did not accept H's claim that she didn't know the lease was for three years); and, after signing the lease, H allowed D&S to go into possession of the farmland and carry out their farming operations.

H also argued that she was entitled to terminate the lease because D&S had failed to "Supply Application Rates of Fertilizer & chemicals by 3rd party."  While D provided H with a handwritten note advising her of the fertilizer and chemicals applied, H claimed that she was entitled to some sort of formal document from the third party chemical suppliers.  D&S said they couldn't provide that document since they received only a single invoice from their supplier for the several properties they farmed.

Justice Bale ruled that it didn't matter whether the information provided by D&S satisfied the contract or not, at least not in the determination of whether H had a right to terminate the contract.  H would only be able to treat the contract as terminated if there was a fundamental breach of the contract.  Failure to provide the fertilizer and chemical information in the form demanded by H would not constitute a fundamental breach of the contract (as would a failure to pay rent).

Read the decision at: Drew v Huskinson.