Supreme Court of Canada clarifies contract law as it applies to releases using Newfoundland case

Bizar Male

At the Newfoundland and Labrador Supreme Court, the application judge concluded that the release barred the third-party claim against the city and stayed the claim. The woman then brought the case to the provincial court of appeal, which unanimously allowed her appeal and reinstated the third-party lawsuit.

The Newfoundland and Labrador Court of Appeal held that the application judge made three extricable errors of law and that the words, the context, and the exchange of correspondence were consistent with the release being interpreted as a release of the couple’s claim in their action against the city only. The city appealed to the Supreme Court of Canada.

However, in a unanimous decision, the Supreme Court of Canada disagreed with the court of appeal and reinstated the application judge’s decision. Writing for the panel, Justice Malcolm Rowe emphasized that Sattva directs courts to “…read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.”

Justice Rowe held that a release is a contract, and the Blackmore rule and jurisprudence pursuant to it should no longer be referred to.

Justice Rowe cautioned that courts may be persuaded to interpret releases more narrowly than other types of contracts, but this is not because there is any special rule of interpretation applying to releases. It is because the broad wording of a release can conflict with the circumstances, especially for claims not in contemplation at the time of the release. The more general the language of the release, the more likely this is.

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