Are Contract Terms Voided If Contract Parties Ignore the Contract Terms?

When Parties to a Contract Show a Lack of Intention to Enforce the Original Terms Within a Contract the Right to Subsequently Enforce the Original Terms May Be Lost.

Understanding When Conduct May Alter the Written Contract Terms and Original Agreement Enforceability

Contract Document After contract terms are established and agreed to, the parties who entered into the agreement often engage in conduct that shows an intent to forgo the terms within the contract.  When the parties show such an intent to forgo the terms, a party is unable to thereafter return to the previous agreement with an attempt to enforce the original terms.

The Law

Extensive case law confirms that conduct of parties to a contract may change the written contract terms and void the right to enforce the written contract terms.  The cases confirming so include Jack Ganz Consulting Ltd. v. Recipe Unlimited Corporation, 2021 ONCA 907 which cites the case of Jedfro Investments (U.S.A.) Ltd. v. Jacyk Estate, 2006 CanLII 16347 which then cites the case of Shelanu Inc. v. Print Three Franchising Corp., 2003 CanLII 52151 whereas each of these cases respectively state:

[56]  The motion judge correctly noted that parties can by their conduct, demonstrate that they do not intend to be bound by clauses in an agreement notwithstanding a clause in the agreement that requires changes to be executed in writing: Colautti Construction Ltd. v. City of Ottawa (1984), 1984 CanLII 1969 (ON CA), 46 O.R. (2d) 236 (C.A.); see also Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 CanLII 52151 (ON CA), 64 O.R. (3d) 533 (C.A.), at paras. 50-60. 

[10]  In this court, the appellants acknowledged that they tried to work out a deal with Jacyk that was different from the bargain they made under the joint venture agreement. However, they submitted that having failed to make a deal, they were entitled to fall back and rely on the default provisions of the joint venture agreement, which would at least entitle them to a buyout of their interest.

[11]  I do not accept this submission. Where parties act in a way that shows they do not intend to comply with or be bound by the terms of their written agreement, one party cannot later come to court and ask to have the agreement enforced for its benefit. [page537] Enforcing the written agreement in these circumstances would be contrary to the intention of the parties, as evidenced by their conduct. See Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 CanLII 52151 (ON CA), 64 O.R. (3d) 533, [2003] O.J. No. 1919, 226 D.L.R. (4th) 577 (C.A.) at pp. 551-52 O.R., pp. 595-96 D.L.R. 

[54] At the trial, the existence of the oral agreement and thus the intention of the parties was in issue. The trial judge relied on the parties' subsequent course of conduct to infer that they did not intend to continue to be bound by the exclusion clauses in the agreement. The trial judge found that Print Three had orally agreed to the surrender of a franchise by Shelanu on a previous occasion, and had allowed Shelanu to change locations and to lease space directly without anything being in writing. Where the parties have, by their subsequent course of conduct, amended the written agreement so that it no longer represents the intention of the parties, the court will refuse to enforce the written agreement. This is so even in the face of a clause requiring changes to the agreement to be in writing. See Colautti Construction Ltd. v. City of Ottawa (1984), 1984 CanLII 1969 (ON CA), 46 O.R. (2d) 236, 9 D.L.R. (4th) 265 (C.A.), per Cory J.A.

[55] On appeal, the appellant has conceded the existence of the oral agreement and its terms but asks this court to enforce the written agreement instead. That submission, in effect, asks this court not to give effect to the intention of the parties. Such a submission is contrary to the classical theory of contract interpretation which emphasizes that courts should ascertain and give effect to the intention of the parties: R. Sullivan, "Contract Interpretation in Practice and Theory" (2000) 13 S.C.L.R. (2d) 369.

[56] Sullivan states, at p. 378, that, "if a conflict arises between the intention of the parties as inferred from the totality of the evidence on the one hand and the meaning of the text on the other, intention should win." Professor Waddams has also argued that if a party knows or has reason to know that a written contract on which that party relies does not represent the intention of the other party, it should not be enforced. See S.M. Waddams, The Law of Contracts, 3rd ed. (Toronto: Canada Law Book, 1993) at paras. 328-29.

[57] The rationale of Sullivan and Waddams is similar, namely, that in addition to certainty, legal values such as fairness, equity and justice underlie contractual interpretation and enforcement. Before the court allows the coercive power of the state to be used to serve the private interests of a party to a contract, [page553] the court will want to ensure that the contract does not offend these legal values.

Interestingly, per the Jack Ganz and Shelanu cases, among others, even where a contract terms states that any changes to the contract must be in writing, where the parties engage in conduct that shows intent to forgo the contract terms, thus failing to amend the terms in writing, the courts will remain firm in the view that the contract was amended by conduct.  Additionally, per Jedfro, the conduct of attempting to renegotiate a deal shows an attempt to forgo the original deal and may result in a loss of the right to return to, and enforce, the original deal.

Statutory Concerns

It is notable that all of the above references are common law cases, meaning judge made law; however, whereas statutorily prescribed law is, generally, overruling of the common law judicial decisions, there may be statutes that will be paramount and require that original contractual terms be imposed despite the conduct of the parties.  For example, among others, section 26 of the Consumer Protection Act, 2002, S.O. 2002, Chapter 30, Schedule A, permits a consumer to cancel an agreement where the supplier is fails to deliver goods or service, or fails to begin services, within thirty (30) days of an agreed upon date.  Accordingly, and contrary to the common law decisions provided above, it may be that in circumstances where a consumer shows an intent to forgo a previously agreed deliver date that the consumer may thereafter cancel the agreement based on the failure of the supplier to deliver goods or services, or to begin services, within the thirty (30) days mandated by statute.  Specifically, section 26 of the Consumer Protection Act, 2002 states:

Late delivery

26 (1) A consumer may cancel a future performance agreement at any time before delivery under the agreement or the commencement of performance under the agreement if the supplier,

(a) does not make delivery within 30 days after the delivery date specified in the agreement or an amended delivery date agreed to by the consumer in writing; or

(b) does not begin performance of his, her or its obligations within 30 days after the commencement date specified in the agreement or an amended commencement date agreed to by the consumer in writing.

Delivery or commencement date not specified

(2) If the delivery date or commencement date is not specified in the future performance agreement, a consumer may cancel the agreement at any time before delivery or commencement if the supplier does not deliver or commence performance within 30 days after the date the agreement is entered into.

Regardless, there are often exceptions to the exceptions; and accordingly, it is always wise to obtain a professional review for your best legal advice prior to making decisions that may affect your best interests and legal rights.  Olson Craig Legal strives to provide the best legal help possible for every client.

Summary Comment

When the parties to a contract show a lack of intention to enforce the original terms of a contract, the parties may lose the right to subsequently enforce the original terms.

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