Canadian Appeals Monitor Information and Commentary on Upcoming and Recent Appeal Court Decisions

Category Archives: Contracts

Subscribe to Contracts RSS Feed

Careful Putting Your Best Foot Forward: Alberta Court of Appeal Eases Access to Summary Dismissal

Posted in Case Comments, Civil Litigation, Contracts

The Alberta Court of Appeal strengthened the post-Hryniak judicial trend in favour of the summary disposition of litigation without trial by upholding the decision of a chambers judge to grant summary dismissal without strict adherence to the applicable Rules of Court.  In Pyrrha Design Inc v Plum and Posey Inc, 2016 ABCA 12, the plaintiff applied for summary judgment but failed to make its case. It saw not just its application, but its entire claim, dismissed, even though the defendant had not brought a cross-application for summary dismissal.… Continue Reading

May it Please the Court: Does “May” in an Arbitration Clause Convey Choice About Proceeding to Arbitration?

Posted in Case Comments, Contracts

The difference between the mandatory “shall” and the permissive “may” in a contract is, perhaps typically, straightforward. One mandates action; the other allows, but does not require, it. This analysis can be more complex in the context of an arbitration agreement: can a party to the agreement force a stay of litigation based on a clause that states the parties may submit the dispute to arbitration? The Privy Council in Anzen Limited v. Hermes One Limited faced essentially this question, and, in part based on Ontario Court of Appeal jurisprudence, held that the answer is yes.… Continue Reading

The Ontario Court of Appeal Declines to Extend the Doctrine of Unconscionability into the Performance of Contracts

Posted in Case Comments, Civil Litigation, Contracts

In the 14 months since the Supreme Court of Canada rendered its landmark decision in Bhasin v. Hrynew, 2014 SCC 71 [1] the general organizing principle of good faith in contract law has been applied in a very restrained manner by courts across Canada. The recent decision of the Ontario Court of Appeal in Bank of Montreal v. Javed, 2016 ONCA 49 is a further example of this trend.… Continue Reading

Getting Around the Corporate Veil through Agency

Posted in Case Comments, Contracts

In the recent decision of 1196303 Ontario Inc v Glen Grove Suites Inc, 2015 ONCA 580, the Ontario Court of Appeal considered to what extent parties not privy to an agreement should be held liable for the obligations it creates.

In that case, 1196303 Ontario Inc. (“119”) entered into a settlement agreement with 1297475 Ontario Inc. (“129”), a shell corporation which was owned by Mrs. Sylvia Hyde. Mrs. Hyde was also the sole owner of Glen Grove Suites Inc. (“Glen Grove”), which owned valuable rental property. Mr. Edwin Hyde, who exercised de factoContinue Reading

Cavendish v Talal and ParkingEye v Beavis: The UK Supreme Court provides a refresher on penalty clauses

Posted in Case Comments, Contracts

The common law penalty rule is poorly understood but can have disastrous consequences for contracting  parties who do not consider it when setting out remedies for contractual breach. The UK Supreme Court recently brought some much needed clarity to the rule and articulated a revised test in a pair of decisions: Cavendish v Talal and ParkingEye v Beavis. The two decisions consider the rule in very different contexts: Cavendish in the valuation of assets in a share sale and ParkingEye in the imposition of a charges for violating parking lot time limits.… Continue Reading

Can you be contractually bound to another party forever?

Posted in Case Comments, Contracts

In Uniprix v. Gestion Gosselin et Bérubé Inc., 2015 QCCA 1427, the Quebec Court of Appeal addressed the previously unanswered question of whether the non-renewal clause in a fixed term contract may be stipulated to be for the benefit only of one of the contracting parties, such that in the eyes of the other contracting party the contract may in effect become perpetual.… Continue Reading

What’s the “Connection”? Ontario Court of Appeal Confirms Continuing Divide Between Jurisdiction and Choice of Law

Posted in Case Comments, Contracts

Two companies based in different provinces enter into a contract. One company sues the other for breach of that contract. If the contract does not say which province’s laws govern the agreement, how does a court determine which law to apply? The Ontario Court of Appeal recently addressed this question – the choice of law rule for contracts – in Lilydale Cooperative Limited v. Meyn Canada Inc. (“Lilydale”).[1]

Fire in A Poultry PlantContinue Reading

BC Court of Appeal Rules Bhasin Framework is Distinct from Implication of Contract Terms for Business Efficacy

Posted in Case Comments, Contracts

A few months ago, the Supreme Court of Canada released its decision in Bhasin v Hrynew, a precedent-setting judgment, recognizing a general organizing principle of good faith in contract law.[1] More recently, the BC Court of Appeal in Moulton Contracting Limited v. British Columbia,[2] considered and elaborated upon Justice Cromwell’s discussion in Bhasin about the doctrines of good faith and implied contractual terms for “business efficacy,” clarifying that the two frameworks are distinct and not to be conflated.… Continue Reading

The U.K. Supreme Court revisits equitable compensation in commercial transactions

Posted in Bankruptcy and Debt, Case Comments, Contracts, Corporate Law, Financial Services

Trusts are widely used in commercial transactions. But, as creatures of equity, trusts raise issues that may not be immediately familiar to everyone who relies on them in the commercial world. Indeed, the interrelationship between equitable doctrines and remedies and common law principles and remedies is complicated. Fortunately, the U.K. Supreme Court has revisited the issue in its recent decision in AIB Group (UK) Plc v. Mark Redler & Co Solicitors, [2014] UKSC 58.

Continue Reading

What tangled webs we weave: The BCCA provides guidance on the tort of deceit and exclusion of liability clauses

Posted in Construction and Real Estate, Contracts, Torts

The British Columbia Court of Appeal’s decision in Roy v Kretschmer, 2014 BCCA 429 provides guidance on the element of reliance in the tort of deceit. It also holds that a contractual clause limiting liability is unenforceable even where the breaching party did not commit a criminal act or egregious fraud.

This decision is of interest to Canadian businesses because it suggests that where a contract has been breached, the breaching party can be sued in tort for hiding the circumstances of the breach if the non-breaching party relies on the breaching party’s fraudulent silence or misrepresentations. Further, in … Continue Reading

SCC Delivers Ground-Breaking Decision in Canadian Contract Law

Posted in Contracts

The Supreme Court of Canada has released a precedent-setting judgment in which it recognized, for the first time, that there is a general organizing principle of good faith in the performance of contracts throughout Canada: Bhasin v. Hrynew, 2014 SCC 71.  The Bhasin case, which was successfully argued by Neil Finkelstein and Brandon Kain of McCarthy Tétrault’s Toronto litigation group, will be very important for Canadian businesses going forward.  As a result of Bhasin, all contracts throughout Canada are now subject to a duty of, at a bare minimum, honest performance, which cannot be excluded by the terms … Continue Reading

Illegal Contracts Does Not Preclude Discrimination Claims

Posted in Case Comments, Contracts

In Hounga v Allen, the U.K. Supreme Court addressed an issue that has not received much attention from the courts recently: the defence of illegality, also called the “ex turpi causa” doctrine. The U.K. Supreme Court had the opportunity to shed light on this defense in the context of employment discrimination towards an illegal immigrant.

Continue Reading

A blockbuster decision in contractual interpretation

Posted in Case Comments, Contracts

In the world of contractual interpretation, the decision of the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp. is a blockbuster. Sattva does three significant things. First, it determines that contractual interpretation generally involves a mixed question of fact and law, not a question of law alone. That holding has major implications for appellate review of decisions involving issues of contractual interpretation, and represents the resolution of an issue that had previously divided provincial appellate courts. Second, Sattva emphasizes the importance to contractual interpretation of evidence of the surrounding circumstances or the factual matrix in which … Continue Reading

Is your standard form release contrary to public policy? The British Columbia Court of Appeal provides guidance

Posted in Case Comments, Contracts, Corporate Law, Torts

Clauses that exclude, or “release”, liability are widespread and critical to risk management for many businesses. Typically, such clauses stipulate that the signee waives the right to sue if they are injured while participating in certain activities. Inevitably, in the event that the signee is injured, a variety of arguments are put forward as to why the particular exclusion clause is unenforceable in the particular circumstances.

Recently, in 2010, the Supreme Court set out a new approach to the analysis of whether an exclusion clause is unenforceable in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC … Continue Reading

Price Tags on Competition are a Restraint of Trade: The Functional Approach to Permissive Non-Compete Clauses Prevails in British Columbia

Posted in Case Comments, Contracts, Labour and Employment

In Rhebergen v. Creston Veterinary Clinic Ltd., 2014 BCCA 97, the British Columbia Court of Appeal granted the appeal of an employer veterinary clinic, Creston Veterinary Clinic (“CVC”), from a Supreme Court of British Columbia decision declaring unenforceable a contract clause requiring its employee, Dr. Stephanie Rhebergen, to pay CVC a prescribed amount in the event she was to compete with CVC within a certain period after the contract was terminated. Unlike conventional non-competition or non-solicitation clauses that constitute a restraint of trade, the clause before the BCCA contained no prohibition. Rather, the clause at issue was permissive in … Continue Reading

Caution: An Entire Agreement Clause May Have Greater Implications Than Expected

Posted in Case Comments, Contracts, Corporate Law

At issue in One West Holdings Ltd. v Greata Ranch Holdings Corp. et al. was whether an entire agreement clause which referred to multiple contracts could be used to incorporate an arbitration clause from one of the other contracts. The British Columbia Court of Appeal held that it could despite the fact that the contracts involved different parties.

Decisions

A number of parties, including Concord Okanagan Developments Ltd., entered into a limited partnership agreement (LPA) to form Greata Ranch Developments Limited Partnership. The LPA described a project management agreement (PMA) that was to be entered into between the Limited … Continue Reading

Are pre-contractual representations “continuing”? Even if the contracting parties change?

Posted in Case Comments, Contracts, Corporate Law

Circumstances change and what is true today may not be true tomorrow. For that reason, some representations carry with them the obligation to advise the representee if the relevant circumstances change. These are usually referred to as “continuing” representations.

But can a continuing representation carry with it the obligation to update a third party, to whom the representation was not even made? The UK Supreme Court says it can in Cramaso LLP v Ogilvie-Grant, Earl of Seafield and Others, a case with a peculiar set of facts which may have broad implications for parties engaged in pre-contractual negotiations.

Continue Reading

Piercing the corporate veil may be easier than you think

Posted in Case Comments, Contracts, Corporate Law

How do corporate and personal liability intersect in a corporation that has only one officer, director and shareholder?  In the recent Shoppers Drug Mart v. 6470360 Canada Inc. case, the Court of Appeal helped to clarify when the person behind the corporation will be found liable.

Background

In October 2005, Shoppers Drug Mart (“Shoppers”) contracted with Energyshop Consulting Inc. (“Energyshop”) to manage and pay its utility bills on a nationwide basis.  Michael Wayne Beamish (“Beamish”) negotiated the contract on behalf of Energyshop, which had not yet been incorporated.  Beamish later incorporated 6470360 Canada Inc. … Continue Reading

“Stop and Identify” Yourself, to Avoid Personal Liability when Acting on Behalf of a Company

Posted in Case Comments, Contracts, Corporate Law

Third parties must know exactly who they are entering into a contract with, especially when dealing with a limited liability company. That said, the identity of the true contracting party may not be clear when an officer, director or employee of a company is negotiating on behalf of the company. Indeed, third parties are generally entitled to believe that these individuals are dealing on their own behalf, rather than on behalf of a company to which they are outsiders.… Continue Reading

SHOTGUN! You should know this before triggering a buy-sell provision

Posted in Case Comments, Contracts

The following post on the Canadian M&A Perspectives blog may be of interest to readers of this blog: SHOTGUN! You should know this before triggering a buy-sell provision.

On November 29, 2013, the Ontario Court of Appeal released its decision in Western Larch Limited v. Di Poce Management Limited, 2013 ONCA 722 with important lessons examining shotgun buy-sell provisions, and in particular, the enforceability of a buy-sell offer that does not perfectly comply with the terms and conditions of the shotgun provision. Read more.Continue Reading

The Latest Word from the SCC on Assessment of Contractual Damages

Posted in Contracts, Labour and Employment

The recent Supreme Court decision in IBM Canada Limited v Waterman, 2013 SCC 70, has gotten much attention for its ruling and comments about the “collateral benefits” principle and how it applies to pension benefits paid to wrongfully dismissed employees during the notice period. The issue was whether the exception should apply to preclude a reduction, in the amount of the pension benefits, to the compensatory damages payable to the employee for the wrongfull dismissal. The application of the “collateral benefits” principle was the central point of disagreement between the majority judgment of Cromwell J. and the dissenting … Continue Reading

The Burden of Proof to Rectify a Contract: The Ordinary Civil Standard Applies

Posted in Case Comments, Contracts

The issue

Rectification is an important equitable doctrine allowing courts to rewrite contracts that erroneously record the agreement reached by the parties.  The basic requirements for rectification are well settled.  Where there is a mutual mistake, the party seeking rectification must show (i) that the parties had a common continuing intention prior to the making of the document alleged to be deficient; (ii) that that intention remained unchanged or existed at the time when the document sought to be rectified was signed; and (iii) by mistake, the parties signed a document that did not accurately reflect their common intention.

However, … Continue Reading

When is a Quistclose trust not a Quistclose trust? When you call it a “debt”

Posted in Aboriginal, Bankruptcy and Debt, Case Comments, Contracts

In Ontario (Training, Colleges and Universities) v. Two Feathers Forest Products LP, 2013 ONCA 598, the Ontario Court of Appeal granted the appeal of an interim receiver, Pricewaterhousecoopers Inc., from a Superior Court of Justice decision where grant funds that were advanced by the respondent, Ontario’s Minister of Training Colleges and Universities (the “Ministry”), to a First Nations limited partnership in northern Ontario, but not spent before the partnership sought to dissolve and appoint the interim receiver, were held to be subject to a “Quistclose trust” for the benefit of the Ministry.

Continue Reading