In two earlier posts (see here and here), we reviewed the Alberta Court
of Appeal's guidelines to assist with basic contract
interpretation (in Bhasin v. Hrynew). In
this post we wrap up our primer on the Court's guidelines.
According to the Court:
Mental suffering is not compensated in
contracts law (the only caveat is whether "harsh modes of
termination" might trigger damages in the case of an
What if one of the parties is at a significant disadvantage in
bargaining power? Where two parties are negotiating and there is
some inequality in "bargaining power, need, or
knowledge", that alone is not enough to
justify an amendment to the terms of a contract. However, the court
might be willing to step in and amend the terms of a contract in
the case of "actual unconscionability". What does
"unconscionable" mean? It depends.... Here's an
example: In the recent case of Maloney v. Dockside Marine
Centre Ltd., 2013 BCSC 395, an exclusion clause in a standard
purchase-and-sale contract was consider by the court to be
"unconscionable" because there was an inequality in the
position of the parties, with a sophisticated and experienced
vendor versus an unsophisticated purchaser.
What if you are negotiating and the other side makes a promise
that never makes it into the agreement? There is a concept in
contract law called "parol evidence". This refers to
evidence of verbal or extraneous negotiations or agreements between
the parties, that might explain, interpret or alter the written
terms of a contract. Think of all the discussions and email
exchanges that never appear in the final written document ... but
they might help explain or shed light on certain provisions of the
written agreement. The Court has indicated that such evidence
should be used very conservatively. An "entire agreement"
clause can validly exclude this type of evidence of previous
negotiations or promises (assuming there is no actual fraud). In
other words, do not rely on this type of evidence
to explain the written agreement. If you want a certain term or
promise in the agreement, then it should appear in
"Courts should be especially wary of altering or
interpreting creatively formal contracts carefully
negotiated and written, with legal advice"; and finally
"Courts should not attempt after the fact
to rewrite a contract to accord with what the court now thinks, or
one party now believes, is more just or more businesslike,
especially in the full light of hindsight."
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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