This decision of the Alberta Court of Appeal provides an example
of a court implying terms into a contract in order to reflect
relevant business practices and business efficacy.
Keephills Aggregate Company Limited (Keephills) and Riverview
Properties Inc. (Riverview) entered into a gravel lease for a term
of two years. Pursuant to the lease, Keephills was granted the
exclusive right to excavate, crush, stockpile and remove gravel
from a parcel of land owned by Riverview. Keephills agreed to a
payment provision of "$1.75/tonne of gravel removed from the
Deposit Area with minimum monthly payments of $14,583.33 on the
first of each month." The minimum monthly payment amount was
arrived at by multiplying the $1.75/tonne by 200,000 tonnes of
gravel and dividing it by the 24 month term of the contract. The
parties expected there was a minimum of 200,000 tonnes of gravel
available, and in fact, both parties believed that there would be
far in excess of that amount.
Keephills' belief as to the amount of gravel available
changed considerably after commencing mining, when it appeared that
there would not be 200,000 tonnes of gravel available; this led to
a dispute between Keephills and Riverview with respect to payment
terms. Keephills took the position that it only had to pay for the
actual amount of gravel removed, at a rate of $1.75/tonne, with the
minimum monthly payments being a payment method of convenience
only. Riverview insisted that Keephills must make the minimum
monthly payments of $14,583.33 during the term of the contract,
regardless of the amount of gravel that Keephills was able to
The trial judge accepted Riverview's position. On appeal,
however, the Alberta Court of Appeal rejected the trial judge's
decision, instead finding that Keephills was only required to pay
for the amount of gravel actually removed. After reviewing the
contract as a whole and certain extrinsic evidence, the Court of
Appeal reached the "inescapable conclusion" that, based
on a factual belief that there would be 200,000 tonnes of gravel
available, Riverview had agreed to lease the land to Keephills for
the purposes of Keephills removing at least that much gravel, and
that Keephills would pay by the tonne accordingly. In reaching its
decision, the Court of Appeal implied two new terms into what it
described as an "incomplete and somewhat ambiguous"
contract: (1) a term of due diligence, requiring Keephills to act
reasonably and consistently with best relevant business practices
in the removal of gravel; and (2) a term that Keephills would not
be required to pay for gravel that it could not reasonably
In imputing terms into the contract, the Court of Appeal noted
that courts should prefer interpretations that are consistent with
the reasonable expectations of the parties, including
"compelling notions of business efficacy," as long as
such an interpretation can be supported by the text of the
contract, and that courts should avoid interpretations that give
rise to an unrealistic result or that would not have been within
the contemplation of the parties when the contract was created.
Notwithstanding the Court of Appeal's decision as to the
meaning of the contract, Keephills' claim for overpayment was
dismissed. Keephills did not plead or conduct its case in a manner
that allowed a fair determination as to the amount overpaid, which
the Court of Appeal found gave rise to a legitimate fairness claim
by Riverview that it was now too late for Keephills to prove its
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The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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