For decades, Canadian Courts have applied the principle that
commercial contracts should be interpreted in a way that avoids
business absurdities. An agreement between two sophisticated
parties should be interpreted in a “commercially
reasonable” manner.
While none of this is controversial, the idea that “good
business sense” will help Courts resolve ambiguities in
contracts or assist them in determining the true intention of the
parties raises more questions than it resolves.
Who determines what is commercially reasonable? Do the
subjective intentions of the parties matter? Does the Court
need expert evidence to assist it in the interpretation
exercise?
Interpreting Contracts to Avoid Commercial Absurdities
