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Contracts - Liability Allocation (2). Shiralian v. Wyldewood Creek Inc.
In Shiralian v. Wyldewood Creek Inc. (Ont CA, 2026) the Ontario Court of Appeal considered a contractual clause limitating liability:[10] In rejecting the appellants’ argument, repeated on appeal, that it would be unconscionable to enforce the limitation of liability clause, the application judge properly referenced, in para. 46 of his reasons, the relevant three-step approach regarding the enforceability of exclusion clauses from Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69:The first step is to determine whether as a matter of interpretation, the exclusion c[l]ause applies. I have no hesitation in concluding that the clause as drafted does apply to the circumstances of this case. Second, if the exclusion clause applies, the second step is to determine whether it was unconscionable at the time the agreement was made. Third, if the exclusion clause applies and it was not unconscionable, then the third step is to determine whether the court should refuse to enforce the clause because of the presence of an overriding public policy. [11] The application judge then followed, correctly in our view, the conclusion endorsed by this court in Ritchie v. Castlepoint Greybrook Sterling Inc., 2021 ONCA 214, 27 R.P.R. (6th) 256, at paras. 3-4, leave to appeal refused, [2021] S.C.C.A. No. 153, that the limitation on the respondent’s liability is not unconscionable nor inconsistent with any of the provisions in the Tarion Addendum or the public policy underlying those provisions and that the parties were free to allocate risk and limit liability.
[12] We agree that the limitation of liability clause here takes away none of the protections under the Tarion Addendum but merely fixes, by agreement, the consequences of any default by the respondent in accordance with the parties’ freedom of contract. We do not accept the appellants’ argument that the enforcement of this clause will destroy the protection of the Tarion Addendum for every new condominium and house purchase in Ontario. The Tercon analysis serves as an effective safeguard against any abuse of such a clause or any other conduct contrary to public policy, as its application to determine enforceability requires a fact-driven consideration of the particular circumstances of each case.
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