Stipulated Remedy Clauses

First published in the Advocates' Quarterly volume 45, Number 4 - Reproduced by permission of Thomson Reuters Canada Limited. This is a condensed version. For the full article please download the pdf. Part 1 of 2 of condensed version - See part II.

The issues in 1465152 Ontario Limited v Amexon Development Inc.1 include the interpretation and enforceability of contractual limitation of remedies clauses, particularly in the context of a claim that can be made under a concurrent tort.

Overview

The Landlord in Amexon wished to demolish a large commercial building in which the Tenant occupied leased premises, and redevelop the property. The Tenant refused to vacate, despite offers for compensation from the Landlord. The Landlord issued a notice to vacate and the Tenant sought and obtained an injunction. Section 13.07 of the lease provided:

Whenever the Tenant seeks a remedy in order to enforce the observance or performance of one of the terms, covenants and conditions contained in this Lease on the part of the Landlord to be observed or performed, the Tenant's only remedy shall be for such damages as the Tenant shall be able to prove in a court of competent jurisdiction that it has suffered as a result of a breach (if established) by the Landlord in the observance and performance of any of the terms, covenants and conditions contained in this Lease on the part of the Landlord to be observed or performed.

Interpreting Contractual Limitation Clauses

A limitation clause should be strictly construed against the party seeking to invoke it.2 Clear and unambiguous language cannot, however, be circumvented through resort to the principle of strict construction. The primary rule of construction is that the language of a contractual provision should be interpreted in accordance with the ordinary and plain meaning of the words employed. The language of the stipulated remedy clause in Amexon, while not elegant, was clear and unambiguous. In the event of a breach of the lease by the Landlord, the clause manifestly limited the Tenant's remedies to a claim for damages.

Barring Or Limiting A Claim Made Under A Concurrent Tort

The fact that a contract contains an express clause that deals with the matter in issue is not sufficient, per se, to bar a claim under a concurrent tort duty of care where the latter provides some benefit or advantage (such as a lengthier limitation period, or a more beneficial assessment of damages) not available were the claim made in contract.3 A concurrent claim in tort can, however, be barred or limited, indirectly as well as directly, by an effectively-worded exemption or limitation clause in the contract.4 The general rule is summarized as follows:5

The rule is not that one cannot sue concurrently in contract and tort where the contract limits or contradicts the tort duty. It is rather that the tort duty, a general duty imputed by the law in all the relevant circumstances, must yield to the parties' superior right to arrange their rights and duties in a different way. In so far as the tort duty is not contradicted by the contract, it remains intact and may be sued upon.

When considering the question whether a contract precludes the plaintiff from suing in tort, the basic principle to be applied is: "[I]n assessing the rights and obligations of the parties, [the court] must commence with the contract. It must look to what the parties themselves had to say about those rights and obligations. "6

Section 13.07 of the lease in Amexon did not make express reference to trespass. This was held sufficient for a finding that the clause did not apply to a concurrent claim in the tort of trespass. That reasoning failed, however, to take into account the following principle regarding indirect contractual prohibition of a concurrent claim in tort:7

A concurrent or alternative liability in tort will not be admitted if its effect would be to permit the plaintiff to circumvent or escape a contractual exclusion or limitation of liability for the act or omission that would constitute the tort.

The principle was...