In Spot Coffee Park Place Inc. v. Concord Adex Investments Limited, the Ontario Court of Appeal recently found that an entire agreement clause only precluded a claim for pre-contractual misrepresentations where those misrepresentations related to the subject matter of the contract. That may sound obvious, but you may be surprised about how narrowly the Court of Appeal interpreted the "subject matter of the contract."
Background facts
Before entering into a 10-year fixed term commercial lease, the tenant Spot Coffee relied on the landlord Concord's representations that the café's customers would have access to free, accessible, and convenient parking. The lease did not include a provision concerning customers' access to parking, but it did include a provision concerning Spot Coffee employee parking, which was subject to additional rent. The lease also contained an entire agreement clause providing that "there are no … representations … in any way relating to the subject matter of this Agreement, express or implied, collateral or otherwise except as expressly set out here" (emphasis added). Spot Coffee opened its café, but there was no customer parking available. The business failed. Spot Coffee abandoned the premises one year later and brought an action against Concord for damages for negligent misrepresentation.
Decision
The main issue at trial and on appeal was whether the entire agreement clause precluded Spot Coffee's claim of pre-contractual negligent misrepresentation.
The trial judge found for Spot Coffee, awarding it over $1 million in damages plus interest and costs. On appeal, Concord argued that the lease's entire agreement clause barred Spot Coffee's claim for pre-contractual negligent misrepresentation because, when the lease was considered as a whole, parking formed part of "the subject matter" of the lease (as parking was addressed in the contract).
The Court of Appeal dismissed Concord's appeal. The Court of Appeal held that the trial judge had specifically considered the entire agreement clause and whether Concord's impugned representations regarding customer parking related to the "subject matter" of the lease. The lease addressed parking, but only with respect to parking spots that Spot Coffee would lease exclusively for its own employees. Employee parking was in a separate area from the free customer parking, the lease only dealt with parking that was granted by Concord in exchange for rental fees, and both parties' evidence was that it was not the business practice for the tenant or the landlord to address free customer parking in a commercial lease. For these reasons, customer parking was not the "subject matter" of the lease and the entire agreement provision did not preclude Spot Coffee's claim.
Key takeaways
The key takeaways from this decision are:
- An entire agreement clause will only preclude claims regarding representations made outside of the four corners of the written agreement where those representations clearly relate to the subject matter of the contract.
- Drafters of contracts should ensure that any representations made before a contract is signed that are being relied on by your client are repeated in the written contract.
- Signers of contracts should review contracts carefully to ensure that the contracts capture all important pre-contractual representations.
We're here to help. If you are involved in litigation or potential litigation involving a contract with an entire agreement clause, please feel free to reach out to the author or a member of our Commercial Litigation group.
[] Spot Coffee Park Place Inc. v. Concord Adex Investments Limited, 2023 ONCA 15.
[] Spot Coffee Park Place Inc. v. Concord Adex Investments Limited, 2021 ONSC 6629.