May 15th, 2020
Jan 22nd, 2020
By Laurent Debrun
Invenergy Wind Canada v. Éolectric Inc., 2019 QCCA 1073
Invenergy produces and sells electricity generated by wind towers. Éolectric finds suitable sites, maps them, obtains regulatory approvals and then collects royalties from Invenergy.
The parties negotiated a complex contract, later amended. A dispute arose as to Éolectric’s entitlement to certain payments pertaining to electricity produced in additional sites.
The contract contains an « entire agreement clause » and Invenergy is adamant that this prevents the court from reading into the contract additional terms having the effect of varying the expressed intent. The Court of Appeal reminds us here that the civil law is based on the primacy of the negotium (the contents of the contract) over the instrumentum (the material form of the contract).
The rule, simply put, is that the true intent of the parties to a contract should have priority over their declared written intent, even in the presence of an « entire agreement clause ».
The clause at issue reads as follows:
« 21. No other agreements. The Purchase Agreement and the Éolectric Transaction Documents represent the full and complete agreement of the parties regarding the Project and subject matter hereof, and except for the further documents and agreements expressly referenced herein or therein or contemplated hereby, there are no other agreements, oral or written, with respect to the Project and subject matter hereof. This Purchase Agreement further supersedes the Memorandum of Understanding, dated May 5, 2003 between Seller and Purchaser solely in connection with the Project and subject matter hereof. » (underlining added)
While such clauses are valid under Quebec law, they will be enforced only if the parties have expressed themselves clearly in the contract. If the instrumentum claiming to contain the parties’ entire spectrum of their deal terms contains an ambiguity, then the Court may bypass the entire agreement clause in search of the true negotium through all admissible rules of evidence.
The Court of Appeal then delves into the nature of the business relationship, the scope of the contract as amended, and concludes that all such evidence, otherwise inadmissible as a result of the entire agreement clause, indicates that the contract does not reflect the true negotium, the deal made.
The Court of Appeal reaffirms that, on appeal, the interpretation of a contract by the trial judge containing ambiguous language is to be shown deference. Failing a gravely and manifestly deficient interpretation of a contract, the Court of Appeal will not interfere with the findings of the trial judge even if it would have come to an opposite yet similarly defensible interpretation. Parties to a contract often include an entire agreement clause precisely to avoid extrinsic evidence being relied upon to vary the terms.
This article was originally published on Thelawyersdaily.ca