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Contracts - Entire Agreement Clause. The Rosseau Group Inc. v. 2528061 Ontario Inc.
In The Rosseau Group Inc. v. 2528061 Ontario Inc. (Ont CA, 2023) the Court of Appeal considered an 'entire agreement' contractual clause:[36] The trial judge’s interpretation is not affected by the entire agreement clause. Such a clause does not prevent the court from considering relevant surrounding circumstances in interpreting the meaning of the contract: Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2021 ONCA 592, at para. 62. . 10443204 Canada Inc. v. 2701835 Ontario Inc.
In 10443204 Canada Inc. v. 2701835 Ontario Inc. (Ont CA, 2022) the Court of Appeal considered the effect of fraud on an 'entire agreement' contractual provision:[16] The motion judge recognized that in Royal Bank of Canada v. 1643937 Ontario Inc., 2021 ONCA 98, 154 O.R. (3d) 561, the court held that a defence of misrepresentation is not precluded by reason only of the existence of an entire agreement clause. ...
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(3) Entire Agreement Clauses and Fraudulent Misrepresentations
[24] Entire agreement clauses are “generally intended to lift and distill the parties’ bargain from the muck of negotiations”: Soboczynski v. Beauchamp, 2015 ONCA 282, 125 O.R. (3d) 241, at para. 43, leave to appeal to S.C.C. refused, [2015] S.C.C.A. No. 243. They are generally read to apply to what was said or done before the agreement was made, so as to exclude such dealings from affecting the interpretation of the agreement. They are essentially a codification of the parol evidence rule: Soboczynski, at paras. 45-47.
[25] However, it is one thing to exclude pre-contractual dealings from the interpretive process. It is another to attempt to extend the reach of an entire agreement clause so that it effectively limits the remedies available for a fraudulent misrepresentation. To be consistent with Hasham and Fea Investments, such a clause, in denying recourse to representations before the making of the contract, could not be read as applying to fraudulent misrepresentations. It could not be read as denying the right of an innocent party to a remedy for a fraudulent misrepresentation, including to rely on the fraudulent misrepresentation as a defence to the action.
[26] In my view, this is exactly the conclusion reached by this court in Royal Bank, at para. 43: “the defence of misrepresentation is not precluded or diminished by reason only of the existence of an entire agreement clause”. . Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation
In Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation (Ont CA, 2021) the Court of Appeal considered the interpretation of an 'entire agreement' contract clause:[62] I do not agree with this submission. An entire agreement clause alone does not prevent a court from considering admissible evidence of the surrounding circumstances at the time of contract formation. As already noted, the surrounding circumstances are relevant in interpreting a contract exactly because “words alone do not have an immutable or absolute meaning”: Sattva, at para. 47. Relevant background and context are often essential to understand contractual language. I therefore agree with the following observations of Fraser C.J. for a majority of the Court of Appeal of Alberta in IFP Technologies (Canada) v. EnCana Midstream and Marketing, 2017 ABCA 157, 53 Alta. L.R. (6th) 96, at para. 124, leave to appeal refused, [2017] S.C.C.A. No. 303:The mere existence of an “entire agreement” provision does not mean that the words chosen beyond that entire agreement provision admit of one interpretation only. The purpose of considering the surrounding circumstances is not to add to, contradict or vary the terms of the agreement but rather use them as an interpretive aid to determine the meaning of the words in dispute. Where parties have concluded an agreement and a court is left to sort out the parties’ objective intentions, it cannot be prevented from considering the surrounding circumstances by a provision that is itself based on the assumption that the agreement is clear — when it is not. [63] The relevant question, then, is whether the evidence considered by the majority was properly part of the surrounding circumstances. I again agree with Fraser C.J., that “[d]etermining what constitute properly surrounding circumstances is a question of fact”: IFP Technologies, at para. 83; see also Sattva, at paras. 49-55, 58; Corner Brook, at para. 44; and Kilitzoglou v. Curé, 2018 ONCA 891, 143 O.R. (3d) 385, at para. 37. Such a question of fact is outside this court’s jurisdiction, because the parties agreed to limit any appeals to questions of law or mixed fact and law: Agreement, s. 9.2. . Royal Bank of Canada v. 1643937 Ontario Inc.
In Royal Bank of Canada v. 1643937 Ontario Inc. (Ont CA, 2021) the Court of Appeal considered the interplay between entire agreement clauses and misrepresentation:[43] While not pressed in argument by the parties, for the purposes of the trial of the narrow issue, it is important to address the motion judge’s related alternative conclusion. As earlier noted, the motion judge concluded that even if she had found that the respondent had made the alleged misrepresentations to the appellants, the effect of the entire agreement clause in the personal guarantees precluded the appellants from relying on any such representations that were not set out in the guarantees themselves. In my view, this conclusion was erroneous. It is well-established that the defence of misrepresentation is not precluded or diminished by reason only of the existence of an entire agreement clause: Bank of Nova Scotia v. Zackheim (1983), 1983 CanLII 1891 (ON CA), 3 D.L.R. (4th) 760 (Ont. C.A.), at pp. 761-62; Beer v. Townsgate I Ltd. (1997), 1997 CanLII 976 (ON CA), 152 D.L.R. (4th) 671 (Ont. C.A.), at paras. 25-32, leave to appeal refused, [1997] S.C.C.A. No. 666. I would not uphold the motion judge’s finding on this issue. . Packall Packaging Inc. v. Ciszewski
In Packall Packaging Inc. v. Ciszewski (Ont CA, 2016) the Court of Appeal circumvented the effect of 'entire agreement' clauses within a separation agreement by reasoning that it did not cover implied terms:[20] The appellants submit that three terms of the Separation Agreement prevented the motion judge from implying a term restricting Anita from selling her shares in Anita Co. without Henry’s consent. Section 1.6 states: “This Agreement replaces all oral or written agreements made between the parties.” Section 5.2 states:Anita and Henry do not want any court to order a change which deviates from or overrides the terms of this agreement, and more particularly this release. Anita and Henry want the court to uphold this agreement in its entirety inasmuch as they are basing their future lives upon this release. Finally, s. 9.1 states: “There are no representations, collateral agreements, warranties or conditions affecting this Agreement.”
[21] The motion judge referred only to s. 9.1, holding that it does not deal with implied terms: at para. 46.
[22] I do not accept the appellants’ submission on this issue. I agree with the motion judge that the language of s. 9.1 does not preclude the implication of a term. Nor does the language of ss. 1.6 and 5.2. In any event, as this court stated in CivicLife.com Inc. v. Canada (Attorney General) (2006), 2006 CanLII 20837 (ON CA), 215 O.A.C. 43, at para. 52, the presence of an entire agreement clause will not preclude the implication of a term of the contract because the term is already part of the existing agreement: finding an implied term does not add a term to the agreement that was not part of the parties’ bargain, but enforces the parties’ reasonable expectations. . Singh v Trump
In Singh v Trump (Ont CA, 2016) the Court of Appeal discussed when an 'all agreement' clause in a contract precludes a tort claim for behaviour in relation to the contract:[110] Unless inapplicable, unenforceable, or otherwise invalid, contractual provisions such as entire agreement clauses may limit a party’s right to sue in tort: BG Checo International Ltd. v. British Colombia Hydro & Power Authority, 1993 CanLII 145 (SCC), [1993] 1 S.C.R. 12, at p. 30. That is because duties based in tort “must yield to the parties’ superior right to arrange their rights and duties in a different way”: BG Checo, at p. 27.
[111] In Tercon Contractors Ltd v. British Colombia (Transportation and Highways), 2010 SCC 4 (CanLII), [2010] 1 S.C.R. 69, Binnie J. (dissenting but supported by a unanimous court on this point) set out the following analytic approach to be used in deciding whether to enforce such clauses, at paras. 122-23:The first issue, of course, is whether as a matter of interpretation the exclusion clause even applies to the circumstances established in evidence. This will depend on the Court’s assessment of the intention of the parties as expressed in the contract. If the exclusion clause does not apply, there is obviously no need to proceed further with this analysis. If the exclusion clause applies, the second issue is whether the exclusion clause was unconscionable at the time the contract was made, “as might arise from situations of unequal bargaining power between the parties” (Hunter, at p. 462). This second issue has to do with contract formation, not breach.
If the exclusion clause is held to be valid and applicable, the Court may undertake a third enquiry, namely whether the Court should nevertheless refuse to enforce the valid exclusion clause because of the existence of an overriding public policy, proof of which lies on the party seeking to avoid enforcement of the clause, that outweighs the very strong public interest in the enforcement of contracts. .....
[112] In his reasons the motions judge referenced Tercon and the analytical approach described therein. His analysis and application to the facts of this case, however, are contained in their entirety in para. 239 of his reasons:[T]he entire agreement and other exculpatory provisions included in the Disclosure Documents or Statements apply and stands in the way of the success of the Plaintiffs’ misrepresentation claims. As a matter of interpretation the clauses apply, and there is no unconscionability or public policy reason to justify not enforcing the exculpatory provisions. [113] In my view, the motions judge erred in concluding, without analysis, that it was not unconscionable to enforce the exculpatory provisions. Unconscionability provides that despite the general principle that parties should be held to the bargains that they have made, there are some parties that must be protected and some bargains that should not be enforced: see A. Swan and J. Adamski, Canadian Contract Law, 3d ed. (Markham, Ont.: Lexis Nexis, 2012) at para. 9.99.
[114] In ABB Inc. v. Domtar Inc., 2007 SCC 50 (CanLII), [2007] 3 S.C.R. 461, at para. 82, LeBel and Deschamps JJ. described the doctrine of unconscionability in the context of limitation clauses, a type of clause similar in nature to exclusion or entire agreement clauses:Under the doctrine of unconscionability, a limitation of liability clause will be unenforceable where one party to the contract has abused its negotiating power to take undue advantage of the other. This doctrine is generally applied in the context of a consumer contract or contract of adhesion. [115] In Zippy Print Enterprises Ltd. v. Pawliuk (1994), 100 B.C.L.R. (3d) 55, the British Columbia Court of Appeal declined to enforce an entire agreement clause to preclude a claim based on a misrepresentation made to a franchisee. The franchisor had made misleading statements about estimated gross sales, expenses, and profits to induce the franchisee to enter an agreement. In rejecting the enforcement of these clauses, Lambert J.A. expressed the following view, at para. 45:A general exclusion clause will not override a specific representation on a point of substance which was intended to induce the making of the agreement unless the intended effect of the exclusion clause can be shown to have been brought home to the party to whom the representation was made by being specifically drawn to the attention of that party, or by being specifically acknowledged by that party, or in some other way. . BDO Dunwoody Limited as Receiver for Wesbell Networks Inc. v. Bell Canada
In BDO Dunwoody Limited as Receiver for Wesbell Networks Inc. v. Bell Canada (Ont CA, 2015) the Court of Appeal commented as follows on principles of statutory interpretation to be applied where a commercial contract contained an "entire agreement" clause (where the contract attempts to negate extrinsic considerations as to it's own meaning):[12] From the decision of the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), at para. 50, makes it clear that “[c]ontractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix.” In most cases, therefore, contractual interpretation will be subject to a deferential standard of review: Martenfeld v. Collins Barrow Toronto LLP, 2014 ONCA 625 (CanLII), at paras. 39-42.
[13] The trial judge was alive to the contractual matrix. She made detailed factual findings with respect to the formation of the MSA, its performance and its breach. She correctly observed that the parties’ subjective intentions were irrelevant to the construction of the agreement, referring to Eli Lilly and Co. v. Novopharm Ltd., 1998 CanLII 791 (SCC), [1998] 2 S.C.R. 129 (see also Martenfeld, at paras. 75, 79). She also declined to consider previous drafts of the MSA in interpreting the agreement executed by the parties. In light of the “entire agreement” clause and binding authority, this was correct: Indian Molybdenum Ltd. v. The King, [1951] 3 D.L.R. 497 (S.C.C.), at pp. 502-503.
[14] The trial judge’s interpretation of the agreement was reasonable and is entitled to deference.
[15] Therefore, we dismiss the appeal on this issue. . Soboczynski v. Beauchamp
In Soboczynski v. Beauchamp (Ont CA, 2015) 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.
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