Contractual interpretation and the factual matrix

Parties meet this after closing, when they disagree about what a clause in the purchase agreement means. The Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, described interpretation as a practical, common-sense approach not dominated by technical rules. The overriding concern is the intent of the parties and the scope of their understanding. See also common post-closing disputes.

Words come first

Sattva says the surrounding circumstances must never be allowed to overwhelm the words of the agreement. The interpretation of a written provision must always be grounded in the text and read in light of the entire contract, and courts cannot use the circumstances to deviate from the text so that they effectively create a new agreement.

Standard-form contracts

In Ledcor, the Court said the factual matrix carries less weight for standard form contracts because the parties do not negotiate the terms, and that judicial precedent is more likely to be controlling. Sattva says its discussion is limited to the common law approach and does not seek to apply to or alter the law of contractual interpretation governed by the Civil Code of Québec. Ask your lawyer which rules govern your agreement, and whether it has an entire agreement clause that limits what surrounding material can be used.