Applying standards of appellate review to contractual interpretation

Partner Jeremy Opolsky recently spoke with Law 360 Canada following a majority judgement by the Supreme Court of Canada (SCC) that clarifies the proper approach to interpreting exclusion clauses under Ontario’s Sale of Goods Act. The SCC also clarified when different standards of appellate review apply to trial courts’ contractual interpretations.

Having argued at the top court on behalf of the intervener Canadian Chamber of Commerce, Jeremy called the majority’s judgment “an expansive decision on the law of contracts that will have an effect on how contracts are appealed in all common law jurisdictions across Canada.”

The SCC ruled that where parties expressly set forth an agreement in a contract, they can negate or vary a statutorily implied right, duty, or liability. The most important consideration is the objective intention of the parties.

“The court’s focus on what parties, particularly less-sophisticated parties, meant instead of what technical language they use, may give comfort to small and medium businesses that they will not be expected to use specific jargon or terms of art in their contracts,” Jeremy said.

Regarding the standards of appellate review, the SCC held that the fact that interpreting a contract requires a court to consider a statutory provision does not automatically mean appellate courts should apply the correctness standard.

Read: No need to say the magic word: Supreme Court lowers threshold for exclusionary clauses in contracts

This ruling directly contrasts with the Chamber of Commerce’s argument, which maintained that having greater openness to using a correctness approach would give businesses of all sizes a better sense of how their contracts would be interpreted by courts in the future.

“The court continued to limit the role of appellate review in contractual interpretation,” Jeremy said. “It emphasized that correctness review, stemming from extricable errors of law, will be rare and uncommon.”

“The court’s insistence on limiting the availability of correctness review will limit the scope of guidance on these issues,” he said.

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