Court Upholds Prevailing Contract Clause

Gilbertson Davis LLPCommercial, Commercial Law, Contract Disputes0 Comments

In the recent case of 1252662 Ontario Inc. v Swisslog, the Ontario Court of Superior Justice held that a contractual clause which provided that, in the event of a conflict with another agreement, that terms of the other agreement would prevail.

In this case, the parties had entered into a multi-million dollar construction contract. One of the documents to the contract set out a number of terms which limited the liability of the defendant as against the plaintiff for a wide variety of issues, including delay in construction. However, that document also provided that the terms of a companion document would prevail in the event of any conflict between the two terms. That companion document provided a general statement that the plaintiff had “all rights and remedies provided by law and by this agreement”.

The construction was ultimately delayed, and the plaintiff sued for its common law damages as incurred a result of the delay. The court was tasked with the question of whether the general statement protecting all rights and remedies was limited by the express terms of the second document which specifically limited liability in the case of delay. The defendant argued that the limited liability clauses qualified and particularized the general statement set out in the other document, as to hold otherwise would allow the plaintiff to escape the specific limited liability agreed upon by the parties in the contract relied on by the defendant.

However, the court ultimately held that the plaintiff could maintain its common law damages claim, as the general clause was clear and was found in the contract that was specifically agreed to prevail in the event of a conflict.

While the resolution of discrepancies between contractual terms may not always be so clearly set out in other cases, the court has made clear that they will respect clauses which set out how such discrepancies are to be resolved, even when they provide for rights expressly limited by another secondary agreement.

If you have a matter involving a contractual dispute, please contact us for an initial consultation.

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