List members may enjoy Pine Valley Enterprises v Earthco Soil Mixtures 2024 SCC 20. It is the first time the Canadian Supreme Court (SCC) has engaged in a substantial discussion of the Sale of Goods Act (SGA) in about thirty years, but moreover it illustrates the ongoing development of our contract law. It may signal the end of an era.

Pine Valley required soil of a particular composition for a project. Earthco shared test results from a particular pile of soil, “R Topsoil”. The test results were preliminary and out of date, which Earthco communicated to Pine Valley and Pine Valley understood. But facing penalties for delay in the project, Pine Valley pressed for immediate delivery of the soil without the usual further testing that Earthco advised. As a result, Earthco’s sales agent inserted a bespoke exclusion into their form: should Pine Valley waive its right to test soil before shipment, Earthco would “not be responsible for the quality of the material”. The R Topsoil was delivered, but it was not satisfactory and had to be replaced. Pine Valley brought suit for breach of the statutory condition that goods sold by description will match their description, among other points. The SCC (and the trial judge) held that the exclusion effectively saved Earthco from liability despite its imprecise wording.

The SCC emphasised that "the objective intention of the parties will be the paramount consideration" (para 60) over the technicalities of the SGA, and that deference is owed to the trial judge on the interpretation of the agreement, on which see the excellent work cited from Daniele Bertolini. It being clear in context that the exclusion clause was intended to exclude just this sort of thing—the R Topsoil not matching the preliminary test results—the statutory condition was over-ridden. Certainly some remnant of that condition remained—Earthco could not have delivered soil from some other pile (and it was not alleged that they did so). But there was an express agreement varying the statutory conditions as conceived by s 53 of the SGA.

The history of the case is confused by the trial judge’s conclusion that the R Topsoil was not to description and Earthco’s concession of this point on appeal—as pointed out in cited work by Clayton Bangsund. At the Ontario Court of Appeal (ONCA), it was held that the clause avoids the implied condition of merchantable quality, but not the implied condition relating to sale by description. Thus the ONCA found for Pine Valley on the basis of a broad interpretation of the implied condition and a narrow interpretation of the exclusion clause—the old covert tools used to protect buyers.

Canada has never had the equivalent of an Unfair Contract Terms Act (UCTA) subjecting exclusion clauses in business-to-business transactions to reasonableness review. Perhaps for this reason, technical interpretations of exclusion clauses have continued in a way that is out of step with the strong preference of Canadian courts to contextualism. But as of Uber v Heller 2020 SCC 16 (and perhaps since Tercon v British Columbia 2010 SCC 4), unconscionability can be used to avoid single clauses. While our jobbing conceptualists work through the breadth and basis of this rule, it can achieve much the same thing as UCTA, even attending to the same factors. With the fruition of unconscionability, and the principle of good faith, perhaps our courts are free to enforce parties’ agreements on their own terms.

Yours truly &c.,
Jack