Library:

• Aviation
• Defamation & Media
• Dispute Resolution & Litigation
• Health & Administrative Law
• Insurance
• Marine
• Professional Liability & Indemnity

Use of Extrinsic Evidence

Published in the April 2007 issue of Litigation Notes - View Article

Return to Main Menu ››

The Ontario Superior Court of Justice recently ruled on the admissibility of extrinsic evidence to interpret the terms of a contract. The contract in question related to a sale of assets by the plaintiff to the defendant.  The contract included a schedule of items sold, including a number of machines.  The descriptions of some of the machines included the phrase “electrics & piping”.  A dispute arose as to whether this description included a buss duct, which is a large power bar which supplied power to some of the machines.

The purchaser contended that the inclusion of the buss duct in the sale should be determined exclusively by reference to the terms of the contract.  The vendor took the position that the contract should be interpreted by considering extrinsic evidence.
The extrinsic evidence to which the vendor wanted to refer related to the fact that before the sale the purchaser had a list of the machinery and equipment drawn up and delivered to the vendor. The principal officer of the vendor said that he didn’t want to sell the buss duct so that it was struck from the list and the schedule attached to the contract contained a blank where the buss duct had been. The original list was missing and only copies of some pages were available at trial.

The court reviewed the general principles relating to the admissibility of extrinsic evidence to interpret the terms of a contract. They are: “(a)   Public policy favours giving written contracts certainty by limiting any consideration of extrinsic evidence adduced for the purpose of interpreting the contract. (b)   Where the written contract contains a provision emphasizing that the document is complete and conclusive, the court should be even more cautious in considering any extrinsic evidence because that clause indicates the parties  agreed to generally exclude such evidence. (c)   If the court finds there is no ambiguity in the terms of the written document, then extrinsic evidence should not be considered. (d)   If the court finds that there is ambiguity in a term then extrinsic evidence may be considered for the purpose of determining whether it assists in establishing the mutual intention of the parties embodied in the document.” 

The Court pointed out that in this case the contract contained a paragraph indicating the parties intended the document to constitute the entire agreement and that this required the Court to exercise great caution in permitting extrinsic evidence. The Court concluded that the extrinsic evidence should not be admitted because it was “…really an impermissible way of adducing evidence of the history of the negotiations.  It does not speak to the general meaning of a term but only as to the subjective intention of only one of the parties as to the meaning of the term”. Further to admit the evidence “…would diminish several valued objectives.  It would diminish the objective of certainty which gave rise to the effort and cost of the parties in retaining solicitors to draft a contract.  It would diminish the objective of economical trials because it would permit the parties to rehash all the negotiations”.