- Mosten 62 -
[81]
Considering the surrounding circumstances of a contract
does not offend the parol evidence rule. That rule precludes
admission of evidence outside the words of the written contract that
would add to, subtract from, vary, or contradict a contract. However,
evidence of surrounding circumstances is not used for this purpose
but rather as an objective interpretive aid to determine the meaning
of the words the parties used: Sattva, supra at paras 59-61.
Therefore, while the factual matrix cannot be used to craft a new
agreement, a trial judge must consider it to ensure the written words
of the contract are not looked at in isolation or divorced from the
background context against which the words were chosen. The goal
is to deepen the trial judge’s understanding of the mutual and
objective intentions of the parties as expressed in the words of the
contract. This approach is in keeping with Lord Steyn’s famous
admonition in Regina v Secretary of State for the Home Department,
Ex Parte Daly, [2001] UKHL 26 at para 28 that “[i]n law context is
everything”.
[82] Thus, in interpreting a contract, a trial judge must
consider the relevant surrounding circumstances even in the
absence of ambiguity: Hall, supra at 24-25; John D. McCamus,
The Law of Contracts, 2nd ed (Toronto: Irwin Law, 2012) at
751 [McCamus]; Bighorn [2015 ABCA 127] at para 10;
Directcash Management Inc. v Seven Oaks Inn Partnership,
2014 SKCA 106 at para 13, 446 Sask R 89; Nexxtep Resources
Ltd v Talisman Energy Inc, 2013 ABCA 40 at para 31, 542 AR
212 [Nexxtep], citing Dumbrell v The Regional Group of
Companies Inc., 2007 ONCA 59 at para 54, 85 OR (3d) 616;
Hi-Tech Group Inc. v Sears Canada Inc., 2001 24049
at para 23, 52 OR (3d) 97 (CA) [Hi-Tech]; Eco-Zone
Engineering Ltd. v Grand Falls-Windsor (Town), 2000 NFCA
21 at para 10, 5 CLR (3d) 55.
[83] Determining what constitute properly surrounding
circumstances is a question of fact. As to what is meant by
surrounding circumstances, this consists of “objective evidence
of the background facts at the time of the execution of the
contract ... that is, knowledge that was or reasonably ought to
have been within the knowledge of both parties at or before the
date of contracting”: Sattva, supra at para 58. Examples of
relevant background facts include: (1) the genesis, aim or
purpose of the contract; (2) the nature of the relationship
created by the contract; and (3) the nature or custom of the
market or industry in which the contract was executed: Sattva,
supra at paras 47-48; Geoffrey L. Moore Realty Inc. v The
Manitoba Motor League, 2003 MBCA 71 at para 15, 173 Man
R (2d) 300; King v Operating Engineers Training Institute of
Manitoba Inc., 2011 MBCA 80 at para 72, 270 Man R (2d) 63;