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Contracts - Specific Term - 'Condition'. Earthco Soil Mixtures Inc. v. Pine Valley Enterprises Inc.
In Earthco Soil Mixtures Inc. v. Pine Valley Enterprises Inc. (SCC, 2024) the Supreme Court of Canada allows an appeal on the contractual and statutory interpretation of the exclusion provision [SGA s.53] in the Sales of Goods Act.
Here the court contrasts the meaning and usage of contractual 'warranties' and 'conditions':[83] The Court of Appeal was correct that there is a recognized distinction, in both the SGA and the case law, between warranties and conditions. In Chabot, the trial judge took into account the nature of the exclusion clause and the status and sophistication of the parties in deciding that “words excluding implied warranties are sufficient only to exclude implied warranties, and do not also exclude implied conditions” (p. 175). The court was mindful that there was no opportunity for negotiation: the plaintiff purchased a vehicle and was required to sign the seller’s standard form agreement that excluded “warranties” implied under the Sale of Goods Act, R.S.M. 1970, c. S10. Because of a defect, the car burst into flames, was destroyed, and the buyer sought damages. Before Tercon and consumer protection legislation, courts often interpreted clauses against the superior party who insisted on their insertion or held them tightly to the precise terms of their claimed exemption. Depending on the words used, the surrounding circumstances and the intention of the parties, such an approach is consistent with s. 53, Sattva and Tercon.
[84] Conditions should be distinguished from warranties “unless there is something in the context to displace the presumption that [those terms were] intended to carry [their] technical meaning” (Rosenberg v. Securtek Monitoring Solutions Inc., 2021 MBCA 100, 465 D.L.R. (4th) 201, at para. 98, citing S. K. Lewison, The Interpretation of Contracts (7th ed. 2021), at p. 284). The cardinal principle requiring courts to interpret a contract in accordance with the parties’ objective intention allows space for what the parties objectively intended those terms to mean. The contracting parties may not have intended to invite the legal ramifications that can accompany the usage of particular terms and thus a strict enforcement of the legal distinction may not always be in keeping with the parties’ objective intention. Thus, a consideration of the surrounding circumstances necessarily means that the words used by the parties cannot always be interpreted in a uniform way because the meaning of even legal terms may depend on who the contracting parties are, their relationship to each other and whether they are sophisticated at contracting.
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