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Contracts - Interpretation - Parole Evidence (Extrinsic Evidence)

. Goodlife Fitness Centres Inc. v. Rock Developments Inc.

In Goodlife Fitness Centres Inc. v. Rock Developments Inc. (Ont CA, 2019) the court cautions on the use of evidence of negotiations in aid of interpreting a contract:
[15] Third, and most important, the application judge erred in relying on the negotiations to interpret the agreements. This court has repeatedly cautioned against looking to negotiations to interpret a contract. The basic principles of commercial contract interpretation were summarized in Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673 (CanLII), 268 O.A.C. 279. At para. 16, Winkler C.J.O. stated:
When interpreting a contract, the court aims to determine the intentions of the parties in accordance with the language used in the written document and presumes that the parties have intended what they have said. The court construes the contract as a whole, in a manner that gives meaning to all of its terms, and avoids an interpretation that would render one or more of its terms ineffective. In interpreting the contract, the court must have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties. [Emphasis added.]
[16] Likewise, in The Canada Trust Company v. Browne, 2012 ONCA 862 (CanLII), 115 O.R. (3d) 287, Feldman J.A. said at para. 71:
While the scope of the factual matrix is broad, it excludes evidence of negotiations, except perhaps in the most general terms … Ultimately, the words of the agreement are paramount.
[17] Brown J.A. cited this in his decision in Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007 (CanLII), 77 B.L.R. (5th) 175, at para. 112:
Canadian common law generally treats evidence of the parties’ specific negotiations as inadmissible for purposes of interpreting a contract … evidence of the factual matrix cannot operate as a kind of alternate means by which an adjudicator constructs a narrative about what the parties must have discussed or intended in their negotiations. In other words, evidence of the factual matrix cannot be used to do indirectly that which the principles of contract interpretation do not permit doing directly. [Emphasis in original; citations omitted.]


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