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Contracts - Interpretation - Oral Contracts

. S & J Gareri Trucking Ltd. v. Onyx Corporation

In S & J Gareri Trucking Ltd. v. Onyx Corporation (Ont CA, 2016) the Court of Appeal commented on principles applied in the interpretation of oral contracts:
[7] The trial judge applied the correct principles applicable to the interpretation of contracts in general and to oral contracts in particular. He held that when dealing with contracts which are substantially or wholly oral: (i) it is necessary to distill from the words and actions of the parties what they intended: see G.H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011) at 16; (ii) evidence of the parties’ subjective intentions has no independent place in determining the terms of their bargain: Eli Lilly & Co. v. Novopharm Ltd., 1998 CanLII 791 (SCC), [1998] 2 S.C.R. 129 at para. 54; (iii) the test of what the parties agreed to requires an objective determination; and (iv) the contract must include the requisite elements of offer, acceptance and consideration.
. Cook v Joyce

In Cook v Joyce (Ont CA, 2017) the Court of Appeal comments usefully as follows on basic issues of contract formation and interpretation, the latter with respect to both written and oral contracts:
[65] A settlement agreement is subject to the general law of contract. For a settlement agreement to exist, the court must find the parties (i) had a mutual intention to create a legally binding contract and (ii) reached agreement on all of the essential terms of the settlement: Olivieri v. Sherman (2007), 2007 ONCA 491 (CanLII), 86 O.R. (3d) 778 (C.A.), at para. 41. Whether the parties have manifested mutual assent to specific terms usually is determined from their overt acts: Bogue v. Bogue (1999), 1999 CanLII 3284 (ON CA), 46 O.R. (3d) 1 (C.A.), at para. 17. Or, as described by this court in McLean v. McLean, 2013 ONCA 788 (CanLII), 118 O.R. (3d) 216, at para. 10, a court must employ an objective approach to the evidence, determining “what a reasonable observer would have believed the parties intended, taking into consideration the evidence of all the parties as well as the surrounding documentary evidence.”

[66] Where the parties reduce their bargain to writing, a court determines the parties’ intentions in accordance with the language used in the written document, having regard to the objective evidence of the factual matrix: Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673 (CanLII), 268 O.A.C. 276, at para. 16.

[67] Oral contracts, such as the one at issue in the present case, present different challenges regarding the issues of formation and interpretation. As put by Angela Swan and Jakub Adamski in Canadian Contract Law, 3rd ed. (Markham, ON: LexisNexis, 2012), at §2.27:
There is no general rule against the enforcement of oral promises, but the fact that a promise is oral suggests that its making may not have been accompanied by anything that sufficiently brought home to the parties the significance of what they were doing and, of course, the terms of an oral promise are no more certain than the parties’ recollections of them.


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Last modified: 01-01-23
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