Knowing what you have promised is important in business.
The financial consequences of contracts can be beneficial or
dire. Lawyers have long advised to "get it in
writing" as without a written contract there is too much
uncertainty. It is difficult to enforce an oral agreement.
With the importance of written contracts to successful
commercial enterprise, the recent decision of the Supreme Court of
Canada in Sattva Capital Corp. v Creston Moly Corp. which
evolved the law of how written contract are interpreted, is of
considerable importance to all business people.
Sattva v Creston involved a dispute about the
interpretation of the amount of a finder's fee owing under the
written agreement. Before the Supreme Court of Canada, the
key question was whether the interpretation of a written contract
was a question of law or a question of mixed fact and law.
The answer to this question impacts on the certainty of
contracts. If it is a question of law, then there is little
deference to the decision at the appeals. If it is a question
of mixed fact and law, then there may be few appeals as many laws
limit appeals to questions of law only which could eliminate many
appeals of decisions on contractual interpretation, but on those
appeals that could proceed, the decision would be given a high
level of deference such that those few appeals would be less likely
Historically, interpretation of a written contract was treated
as a question of law such that an arbitrator (or judge) would be
given significant deference and there would be great difficulty in
trying to appeal a decision involving interpretation. This
came from Medieval England when jury trials were the norm, juries
were usually illiterate, and as a result interpretation of written
documents needed to be considered by a judge (as they could read)
as a question of law. In Sattva v Creston, the
Supreme Court decided that, since the jury illiteracy rationale no
longer applies (as most trials in Canada are no longer before
juries and most jury members can read), contractual interpretation
is now properly a question of mixed law and fact, in respect of
which more deference is owed to arbitrators' decisions.
There are both positives and negatives to this change. On
one hand, there may be greater finality to the decision of trial
judges or arbitrators as losing parties may well be less able to
appeal decisions. The litigation may not drag out as long and
the parties can get back to doing business sooner.
On the other hand, Sattva may also reduce the
commercial certainty provided by written contracts. With
questions of interpretation less likely to make it before the
Supreme Court or provincial courts of appeal, there could be less
uniformity in the law. We may not be able to know what a
clause or wording means if we have no guidance from appeal courts.
A decision of one trial judge is not binding on other trial
judges and contradictory decisions may result. Further, most
of the laws limiting the right to appeal to questions of law were
written when contractual interpretation was a "question of
law". The legislatures that enacted the laws may not
have intended to remove contractual interpretation from the right
to appeal and it remains to be seen whether some or all of those
laws will be re-written.
All commercial parties should be mindful of the coming changes
and the potential for less certainty caused by the decision in
Sattva v Creston.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).