Ontario Court of Appeal states that the ability to imply terms into a contract with an entire agreement clause is limited; prior caselaw on implied terms revisited in lighted of Bhasin; importance of not ignoring “boilerplate.”
The short facts of this case were that a vendor of a property mistakenly signed an agreement that permitted the purchaser to acquire a property below market value. The purchaser attempted to waive a condition to the contract by giving written notice to the vendor. Absent this waiver before a specified date, the contract would come to an end and the vendor would not have to sell the property to the purchaser. The section of the contract dealing with notice provided for personal service or notice by hand delivery, fax or email to specified “addresses,” none of which were explicitly provided in the contract. The written notice was not made personally and as no other “addresses” were provided in the contract, no other attempts to serve notice of the waiver were found by the motions judge to be effective. The agreement contained an entire agreement clause that stated that there was no “representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.” The motion judge found that the entire agreement clause precluded the implication of an implied term as to notice. As such, the vendor was able to avoid selling the property at a lower price than was anticipated.
On appeal, among the arguments made by the purchaser were that, in order to give business efficacy to the agreement, there ought to be implied into the agreement a term that notice waiving the conditions in favour of the purchaser could be given by fax to the vendor’s solicitor and by hand delivery to one of the properties. They also argued that the decision in CivicLife.com Inc. v. Canada (Attorney General) (2006), 215 O.A.C. 43, does not preclude the implication of a term even if there is an entire agreement clause. That decision has been cited as support for not letting an entire agreement clause operate where it would be unjust or inequitable to do so, including where contact power has been exercised abusively. The Court in this case thought that CivicLife.comwas about whether a contract included a duty of good faith performance and, when they concluded it did, it used an implied term to achieve that In light of the recent Bhasin case on good faith, CivicLife.com was seen as being “about the importance of acting in good faith in contractual dealings, not about a general ability to imply terms – whatever their nature – notwithstanding an entire agreement clause.” The Court then declined to imply a term noting:
As Cory J.A. (as he then was) held in G. Ford Homes Ltd. v. Draft Masonry (York) Co. (1983), 43 O.R. (2d) 401 (C.A.), at p. 403: “no term will be implied that is inconsistent with the contract.” As mentioned above, the Agreement expressly provided a way in which the Vendor could be served: personally. There was no indication that the Vendor was evading personal service of the notice, and the Purchaser made no effort to serve the Vendor personally. To imply other terms in relation to notice would run contrary to the express notice provisions in the Agreement. The device of implying contractual terms is to be used sparingly and with caution: John D. McCamus, The Law of Contracts, 2nd ed. (Toronto: Irwin Law, 2012) at p. 774. Finally, I agree with the Vendor that implying the terms sought by the Purchaser is not necessary to give business efficacy to the Agreement. Therefore, these terms should not be implied as a matter of presumed intention.
The result here emphasizes the limited ability to use claims of business efficacy or injustice or inequity to imply terms into a contract. It is also about the importance of focusing on the boilerplate – in this case actually including the relevant addresses in a notice section, understanding the notice provision and then actually complying with the terms of that notice provision, rather than hoping that close enough will be sufficient or that “business efficacy” will allow for something other than strict compliance.