Interpretation of Contracts General Rules When interpreting a contract, Courts will consider the factual background and circumstances, the business realities as well as the express words that were used (Prenn) Evidence of negotiations should not be considered (Prenn). The exception is in a claim for rectification contra proferentem Principle of contract interpretation, if the contract has two possible meanings, the one that is favourable to the party that drafted it will be applied (Photo Production) Parol Evidence Rule Exceptions The general rule is that oral or other types of negotiations that took place before the agreement was reduced to writing will not be considered by the courts when contracts are interpreted (Hawrish) Plaintiff (lawyer) said he didn’t read document, and relied on bank representation, Court: no, not collateral contract List of exceptions However, in limited circumstances parol evidence can add to or vary written contracts. There is a strong presumption against this, especially when the oral representations seem contrary to the written document. But the presumption may be rebutted in a number of exceptions (Tilden Ont CA) Partial list of ways evidence may be considered (Gallen): Ambiguities in contract Consider term that is implied by the contract Rectification Establish condition precedent Establish collateral contract Allege that written document was only part of the agreement Support claim for equitable remedy Establish tort duty of care To show that contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of consideration, or lack of contracting intention Collateral Contract Can it be considered? – Onerous Provision-More liberal position When a written contract contains a particularly onerous provision the offeror may be required to bring the acceptor’s attention to it (Tilden ONT CA) Situation where party not expected from reading contract, and would have been discouraged from doing so, clerk knew he didn’t read agreement and didn’t encourage him to, didn’t instruct on more onerous provision, situation of haste Hard Approach: Carmen Construction The parol evidence rule is near absolute, it is generally unreasonable to think that parties would intend terms that contradict or are inconsistent with the written document Approach”- Gallen “Logical In order for the parol evidence to be considered a valid collateral agreement, the representation must have been both intended and understood to be a part of the binding contract (Gallen). Is there a contradiction between the parol evidence and the written agreement?
Interpretation of Contracts General Rules When interpreting a contract, Courts will consider the factual background and circumstances, the business realities as well as the express words that were used (Prenn) Evidence of negotiations should not be considered (Prenn). The exception is in a claim for rectification contra proferentem Principle of contract interpretation, if the contract has two possible meanings, the one that is favourable to the party that drafted it will be applied (Photo Production) Parol Evidence Rule Exceptions The general rule is that oral or other types of negotiations that took place before the agreement was reduced to writing will not be considered by the courts when contracts are interpreted (Hawrish) Plaintiff (lawyer) said he didn’t read document, and relied on bank representation, Court: no, not collateral contract List of exceptions However, in limited circumstances parol evidence can add to or vary written contracts. There is a strong presumption against this, especially when the oral representations seem contrary to the written document. But the presumption may be rebutted in a number of exceptions (Tilden Ont CA) Partial list of ways evidence may be considered (Gallen): Ambiguities in contract Consider term that is implied by the contract Rectification Establish condition precedent Establish collateral contract Allege that written document was only part of the agreement Support claim for equitable remedy Establish tort duty of care To show that contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of consideration, or lack of contracting intention Collateral Contract – Can it be considered? Onerous Provision-More liberal position When a written contract contains a particularly onerous provision the offeror may be required to bring the acceptor’s attention to it (Tilden ONT CA) Situation where party not expected from reading contract, and would have been discouraged from doing so, clerk knew he didn’t read agreement and didn’t encourage him to, didn’t instruct on more onerous provision, situation of haste Hard Approach: Carmen Construction The parol evidence rule is near absolute, it is generally unreasonable to think that parties would intend terms that contradict or are inconsistent with the written document “Logical Approach”- Gallen In order for the parol evidence to be considered a valid collateral agreement, the representation must have been both intended and understood to be a part of the binding contract (Gallen). Is there a contradiction between the parol evidence and the written agreement?
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