Insurance companies and lawyers often use printed forms or traditional wordings when someone signs a release of a claim. That can produce uncertainties. The uncertainties have now changed because of a very recent Supreme Court decision; now they are probably larger, not smaller.
The most common uncertainties and dispute are whether the release bars all possible claims, or just the claim which the parties discussed or negotiated. Often the formal release document purports to release every possible claim of every type. There used to be special old rules and presumptions for deciding that question.
The 2014 Sattva decision of the Supreme Court changed the law of interpreting contracts in Canada. Now the Supreme Court has just held that those old rules about releases are gone. Instead, a release is a contract to be interpreted under the Sattva rules, like any other contract. Background facts when making a contract are often relevant and admissible. They include circumstances known to the parties and the nature of their relationship. But subjective intent is neither admissible nor relevant. And an unknown claim can be released. Nor does it take special exact language to have such a wide release.
The Supreme Court points out that, unfortunately, objective apparent intent at the time of signing often conflicts with the face of the release signed. That leads to uncertainty, and possible need for a trial, which obviously neither party wanted. So printed forms and boilerplate wording off a computer or a precedent are very dangerous. Especially when an auto body shop proffers the release and has it signed.
Instead, the parties should discuss and agree on whether the release is about one specific claim, or about every possible claim. And the document signed should make it very clear which result the parties choose.
The case expressly does not decide whether evidence of the parties’ negotiations is admissible.
The potential defendant who is no longer to be liable, may find that a consent judgment gives better protection than a discontinuance and release. A judgment may be protected by various forms of res judicata. Maybe a suit should even be started, just to permit an immediate consent judgment.
See Corner Brook (City) v. Bailey 2021 SCC 29.
– Hon. J.E. Côté
The Commentaries are intended to call the attention of lawyers to promising or threatening developments in the law, in civil procedure, in developing their skills, or simply to describe something curious, funny or intriguing.
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