Primer on Contract Interpretation (Part 1)

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Intellectual property (IP) contracts in Alberta are interpreted just as any contract would be. The same basic rules of interpretation apply, whether it is an IP assignment or transfer, a software license, a complex techology asset acquisition, the hiring of a technology employee or consultant, a non-disclosure agreement or any commercial agreement with an IP element.

The Alberta Court of Appeal in Bhasin v. Hrynew, 2013 ABCA 98, has provided some helpful guidelines to assist with basic contract interpretation. If you deal with contracts in your job, then here are some tips to see how the courts will interpret your agreements:

  • Think there is a duty to perform contractual obligations in “good faith”? Guess again. “There is no duty to perform most contracts in good faith.” The court cited an Ontario decision (Transamerica Life Canada v ING Canada 2003 CanLII 9923 (ON CA) (para 51)) and two Alberta Court of Appeal cases (Mesa Operating Partnership v Amoco Canada Resources (1994) 149 AR 187 (CA) and Klewchuk v Switzer, 2003 ABCA 187 (CanLII)). The courts in these cases found no general duty of “good faith”, and they involved very different types of contract.
  • What about in employment agreements, where (arguably) there is an imbalance of power in favour of the employer? The court said there is a relatively narrow duty of good faith in employment contracts: Employers must not announce or implement termination in a “harsh or demeaning way”. This applies to the method of termination, not the reasons for the termination. Other than that, there is no general duty of good faith in employment contracts. The Court cited two cases which state that employment contracts are not generally contracts of good faith in all respects. (Wallace v United Grain Growers 1997 CanLII 332 (SCC), and Keays v Honda Canada, 2008 SCC 39 (CanLII).

More to come.

Topics:  Contract Interpretation, Employment Contract, Terms and Conditions

Published In: General Business Updates, Intellectual Property Updates, Labor & Employment Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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