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36 Can. Bus. L.J. 21 (2002)
The Ambiguity Exception to the Parol Evidence Rule

handle is hein.journals/canadbus36 and id is 45 raw text is: THE AMBIGUITY EXCEPTION TO THE PAROL
Paul M. Perell*
Disputes about the interpretation of a contract are frequently
litigated. In adjudicating these disputes, the court may always
admit extrinsic evidence about the circumstances surrounding the
making of the contract and about the commercial purpose of the
agreement,' but when a contract is made comprehensively in writing
then, under the parol evidence rule, extrinsic evidence of the negoti-
ations and of the subjective intentions of the parties is not admissi-
ble.2 Under what is known as the parol evidence rule,3 when a
contract is made exclusively in writing, the rule of interpretation is
that the meaning of the parties is to be determined from the language
that they committed to writing read in light of the surrounding
* Partner, WeirFoulds LLP, Toronto.
1. Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.); Reardon Smith Line Ltd. v. Hansen-
Tangen, [1976] 3 All E.R. 570 (H.L.); Chisholm v. Chisholm (1915), 49 N.S.R. 174 at
pp. 181-82, 24 D.L.R. 679 (C.A.); Canada Square Corp. v. VS Services Ltd. (1981), 34
O.R. (2d) 250, 130 D.L.R. (3d) 205, 15 B.L.R. 89 (C.A.); ACLI Ltd. v. Cominco Ltde
(1985), 61 B.C.L.R. 177 (C.A.); Kentucky Fried Chicken Canada v. Scott's Food Services
Inc. (1998), 114 O.A.C. 357, 41 B.L.R. (2d) 42 (C.A.); Hi-Tech Group Inc. v. Sears
Canada Inc. (2001), 52 O.R. (3d) 97, 141 O.A.C. 56, 11 B.L.R. (3d) 197 (C.A.).
2. Shore v. Wilson (1842), 9 Cl. & Fin. 355 at pp. 565-66; Goss v. Lord Nugent (1883), 110
E.R. 713 (K.B.); Ellis v. Abell (1884), 10 O.A.R. 226 (C.A.); Indian Molybdenum Ltd. v.
The King, [1951] 3 D.L.R. 497 (S.C.C.);Alampi v. Swartz, [1964] 1 O.R. 488,43 D.L.R.
(2d) 11 (C.A.); Hawrish v. Bank of Montreal (1969), 2 D.L.R. (3d) 600, 66 W.W.R. 673,
[1969] S.C.R. 515; Imperial Oil Ltd. v. Nova Scotia Light & Power Co. (1977), 77 D.L.R.
(3d) I (N.S.C.A.); Bauer v. Bank of Montreal (1980), 110 D.L.R. (3d) 424, [1977] 2
S.C.R. 817, 21 N.S.R. (2d) 321; St. Lawrence Cement Inc. v. Wakeham & Sons Ltd.
(1995), 26 OR. (3d) 321, 23 B.L.R. (2d) 1, 86 O.A.C. 182 (C.A.), leave to appeal to
S.C.C. refused 101 O.A.C. 320n.
3. A. Herschorn, The Parol Evidence Rule (1998), 20Adv. Q. 176; P.M. Perell, A Riddle
Inside an Enigma: The Entire Agreement Clause (1998), 20 Adv. Q. 287; D.R. Bennett,
Recent Developments in the Law of Parol Evidence (1993), 51 Advocate 511; S.M.
Waddams, Do We Need a Parol Evidence Rule? (1991), 19 C.B.L.J. 385; B.P. Smeenk,
Ambiguities and Extrinsic Evidence (1990), 11 Adv. Q. 235; S.M. Waddams, Two
Contrasting Approaches to the Parol Evidence Rule (1986-87), 12 C.B.L.J. 207; F
Dawson, Parol Evidence, Misrepresentation and Collateral Contracts (1982), 27 McGill
L.J. 403; J. Swan and B.J. Reiter, Developments in Contract Law: The 1979-80 Term
(1981), 2 S.C.L.R. 125; A. Herschorn, The Admissibility of Parol Evidence to Prove
Misrepresentation and Collateral Agreement (1986), 7 Adv. Q. 156.

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