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Contracts - Entire Agreement Clause

Contracts - Interpretation - Post-Commencement Behaviour

Soboczynski v. Beauchamp (Ont CA, 2015)

In this case the Court of Appeal comments on the nature and effect of 'entire agreement clauses', particularly with respect to their effect on tort claims for acts and omissions occuring after commencement of the contract:
[40] Accordingly, the key question is whether the entire agreement clause in the APS negatives the respondents’ right to sue in tort based on misrepresentations made in the SPIS – a document completed after the APS was entered into.

[41] In my view, the answer to the question is that, in the circumstances of this case, any consequences flowing from representations made in the SPIS were outside the reach of the entire agreement clause. The entire agreement clause in the APS operates retrospectively, not prospectively. In other words, the application of the clause is restricted to limit representations, warranties, collateral agreements, and conditions made prior to or during the negotiations leading up to the signing of the APS. When the appellants made representations in the SPIS, a document completed after the APS had been signed by all parties, the entire agreement clause was spent.

[42] This conclusion is supported by the general purpose of entire agreement clauses, jurisprudence from this court, the plain meaning of the entire agreement clause at issue in this case, and the post-contractual conduct of the parties.
General Purpose of Entire Agreement Clauses

[43] An entire agreement clause is generally intended to lift and distill the parties’ bargain from the muck of the negotiations. In limiting the expression of the parties’ intentions to the written form, the clause attempts to provide certainty and clarity.

[44] In Inntrepreneur Pub Co. Ltd. v. East Crown Ltd., [2000] 41 E.G. 209 (U.K. Ch.), Lightman J. colourfully described the purpose of an entire agreement clause as follows:
The purpose of an entire agreement clause is to preclude a party to a written agreement threshing the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty… For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere. [Emphasis added.]
[45] Legal commentators appear to be united in their view that entire agreement clauses are, generally speaking, retrospective in nature. According to Angela Swan, “An “entire agreement” clause deals only with what was done or said before the agreement was made and seeks to exclude those statements and acts from muddying the interpretation of the agreement; it is a contractual invocation of the parol evidence rule”: Canadian Contract Law, 3d ed. (Markham: LexisNexis Canada, 2012), at p. 600 (emphasis in original); see also John D. McCamus, The Law of Contracts, 2d ed. (Toronto: Irwin Law Inc., 2012), at p. 733.

[46] Justice P.M. Perell agrees. He says that “[t]he parol evidence rule then directs that the written contract may not be contradicted by evidence of the oral and written statements made by the parties before the signing of the contract. The entire agreement clause is essentially a codification of the parol evidence rule”: “A Riddle Inside an Enigma: The Entire Agreement Clause” (1998) The Advocates’ Q. 287 at 290-91 (emphasis added).

[47] And according to Professor M.H. Ogilvie, entire agreement clauses are “patently not applicable… where the representation postdates the contract”: “Entire Agreement Clauses: Neither Riddle Nor Enigma” (2009) 87 The Canadian Bar Review at 642 (emphasis added).

Jurisprudence From This Court

[48] While there appears to be little jurisprudence on the effect of an entire agreement clause on representations made after the contract containing the clause is entered into, some assistance can be found in this court’s decision in Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 CanLII 52151 (ON CA), 64 O.R. (3d) 533 (C.A.), subsequent proceedings, (2006) 2006 CanLII 13954 (ON CA), 19 B.L.R. (4th) 19 (Ont. C.A.).

[49] Shelanu involved a contractual dispute in which the question was whether an entire agreement clause in a written agreement rendered unenforceable a subsequent oral agreement between the parties. Justice Weiler, writing for the court, concluded it did not.

[50] Shelanu clarified certain points about entire agreement clauses.

[51] First, an entire agreement clause does not prevent the parties from amending the terms of their agreement. In other words, post-contract events can affect both the enforceability of the obligations in the agreement and add new obligations to those imposed by its terms.

[52] Second, and relatedly, entire agreement clauses do not apply prospectively unless the wording expressly so provides. In the words of Weiler J.A., at paras. 49-50:
[A]n exception to the parol evidence rule is the existence of any subsequent oral agreement to rescind or modify a written contract provided that the agreement is not invalid under the Statute of Frauds: Ellis v. Abell (1884), 10 O.A.R. 226 (Ont. C.A.) at para. 85.

Clauses such as the entire agreement clause in issue here are normally used to try to exclude representations made prior to the signing of the written agreement. See P.M. Perell, “A Riddle Inside an Enigma: The Entire Agreement Clause” (1998) The Advocates’ Q. 287. Nothing in [the entire agreement clause] suggests that an oral agreement to surrender the franchise several years later would be of no effect. It cannot be said the entire agreement clause was clearly intended to cover any and all future contractual relations between Shelanu and Print Three. [Emphasis added.]
[53] Both the general purpose of entire agreement clauses set out above and the approach to their application evident in this court’s decision in Shelanu support the conclusion that, subject to express wording to the contrary, these clauses do not apply to agreements or representations that post-date the contract in which the clause is found.
On the issue of post-commencement conduct and contractual interpretation, the Court stated:
[60] Finally, Canadian courts often look to the post-contractual conduct of the parties to shed light on what they intended the words enshrined in their written agreement to mean. The trend in Canada toward analyzing the subsequent actions of the parties is captured by G.H.L. Fridman in The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011), at pp. 450-51:
Canadian courts have adopted the view that subsequent conduct can be a useful guide to the interpretation of a written contract… In one case, concerned with whether a restrictive covenant in a contract was personal to the parties or went with the land, Thomson J. of the Supreme Court of Saskatchewan, said that in cases involving an ambiguity in an agreement, “there is no better way of determining what the parties intended than to look to what they did under it [Bank of Montreal v. Univ. of Saskatchewan (1953), 1953 CanLII 166 (SK QB), 9 W.W.R. (N.S.) 193 (Sask. Q.B.), at 199]. There is much to be said for this approach, as many Canadian judges since 1970, have declared. In Canada it seems clear that the subsequent actions of the parties may be admissible to explain the true meaning and intent of their agreement. [Citations omitted.]

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