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Contracts - Terms - Express terms - Exclusion clauses - Term and termination

Thursday, September 08, 2016 @ 8:00 PM  


Appeal by the plaintiffs, Chuang and his companies, from dismissal of an action against the defendant, Toyota Canada. The plaintiffs had a history of involvement in operating luxury car dealerships. The parties entered into an agreement for the construction and operation of a Lexus dealership in downtown Toronto. The defendant terminated the agreement due to the plaintiffs’ failure to meet the construction deadlines stated therein. The plaintiffs sued for specific performance of the agreement plus damages. By trial, the plaintiffs had opened a different dealership on the proposed site. They accordingly limited their claim to damages arising from the defendant’s wrongful termination of the agreement. The trial judge concluded that the defendant did not act reasonably in terminating the agreement. However, the agreement’s exclusion clause insulated the defendant from any damages or losses sustained by the plaintiffs as a result of the agreement’s termination. The action was dismissed with costs of $1.2 million awarded to the defendant. The plaintiffs appealed.

HELD: Appeal dismissed. Accepting for the purpose of the appeal that the defendant did not act reasonably in terminating the agreement, the trial judge properly rejected the plaintiffs’ argument that the exclusion provision served to insulate the defendant from liability solely for reasonable exercises of the termination power. The broad language of the provision, particularly the reference to damages, accorded with the trial judge’s interpretation. The trial judge’s interpretation was not commercially absurd, as the provision did not preclude the plaintiffs from seeking specific performance or injunctive relief. As post-termination events demonstrated, the plaintiffs were able to direct the efforts undertaken pre-termination to a deal with a different automobile manufacturer. The trial judge’s interpretation of the exclusion clause was not unreasonable or tainted by palpable and overriding error. Leave to appeal costs was refused.