Alberta, a province renowned for its robust economy and diverse industries, has witnessed a notable increase in commercial litigation cases in recent years. As businesses operate in increasingly complex commercial environments, the potential for disputes has grown significantly. One area of particular interest within Alberta’s commercial litigation landscape is the rise of complex contract disputes.

The Complexity of Modern Commercial Contracts

Contemporary business transactions are underpinned by intricate commercial contracts that often involve multiple parties, jurisdictions, and specialized subject matter. Many of these contracts contain complex provisions relating to performance obligations, warranties, indemnities, dispute resolution mechanisms, force majeure events, intellectual property rights, data privacy, cybersecurity, and sustainable business practices.

The complexity of these contracts is further compounded by the increasing use of technology in commercial transactions, such as electronic signatures, blockchain, and artificial intelligence. As a result, contract disputes can devolve into highly intricate and contentious legal battles, necessitating meticulous legal analysis, strategic litigation approaches, and a deep understanding of the evolving legal landscape.

Key Legal Principles Governing Contract Disputes in Alberta

To effectively navigate the complexities of commercial contract disputes in Alberta, it is essential to understand the fundamental legal principles that govern these matters. Some of the core principles include:

Contract Interpretation

Alberta courts employ a contextual approach to contract interpretation, considering the entire contract, its commercial purpose, and the parties’ intentions. This approach involves analyzing the plain language of the contract, the surrounding circumstances, and any relevant extrinsic evidence, such as correspondence, emails, or negotiation records. In the precedent-setting case Sattva Capital Corp v Creston Moly Corp, the Supreme Court of Canada asserted the importance of considering the “factual matrix” in the exercise of contractual interpretation. The factual matrix is essentially regarding the “surrounding circumstances of the contract”, and taking a contextual approach.

Following this precedented method, Alberta courts employ a similarly contextual approach to contract interpretation, considering the entire contract, its commercial purpose, and the parties’ intentions. This approach involves analyzing the plain language of the contract, the surrounding circumstances, and any relevant extrinsic evidence, such as correspondence, emails, or negotiation records.The court’s goal is to effect the parties’ intentions as expressed in the contract, rather than imposing a rigid or literal interpretation.

Implied Terms

In certain circumstances, the courts may imply terms into a contract to give effect to the parties’ presumed intentions. However, implied terms must be necessary to give business efficacy to the contract and must be so obvious that they go without saying. Implied terms cannot contradict any express terms of the contract and must be consistent with the overall commercial purpose of the agreement.

Frustration of Contract

If a supervening event fundamentally changes the nature of a contract, making performance impossible or radically different from what was initially contemplated, the contract may be frustrated. Frustration is a narrow doctrine that applies only in exceptional circumstances where the event occurs after the contract is formed, is not the fault of either party and fundamentally changes the nature of the contract.

Force Majeure Clauses

Contracts may also contain a “force majeure” clause to protect the parties from events that are agreed to be outside normal business risk to deal with potential frustrations. Where a contract does not contain a force majeure clause, or the force majeure clause does not apply, a party may look to the common law doctrine of frustration.

Some examples of a force majeure include:

• Natural Disasters: Some events like earthquakes, floods, hurricanes, wildfires, etc., are seen as “acts of God”. They are therefore unforeseen/uncontrollable occurrences that can make contract performance impossible.
• Government Actions or Regulations: Legislative changes, sudden export bands, or new tariffs could disrupt a supply chain agreement for instance.
• Pandemics and Epidemics: Outbreaks like COVID-19 for instance could directly impact a party’s ability to perform the contract.
• War, Acts of Terrorism, or Civil Unrest: Armed conflicts or riots can disrupt business operations or prevent performance.

Breach of Contract

A breach of contract occurs when a party fails to perform its obligations under the contract. Remedies for breach of contract include damages, specific performance, and injunctions. The choice of remedy will depend on the nature of the breach, the extent of the loss suffered, and the availability of alternative remedies.

Mitigation of Damages

A party who has suffered a loss due to a breach of contract has a duty to mitigate its damages. This means that the injured party must take reasonable steps to minimize its losses. The duty to mitigate does not require the injured party to take unreasonable steps or to incur significant expense. However, failure to mitigate may reduce the amount of damages recoverable from the breaching party.

Emerging Trends in Commercial Contract Disputes

Several significant trends are reshaping the landscape of commercial contract disputes in Alberta. These trends are driven by various factors, including technological advancements, globalization, and evolving societal expectations.

Influence of Technology:

Technology is increasingly pervasive in commercial transactions, encompassing contract formation, negotiation, performance, and dispute resolution. This technological evolution has given rise to novel legal challenges, such as issues related to electronic signatures, data privacy, cybersecurity, and the enforceability of smart contracts. In 1353141 Alberta Ltd v Roswell Group Inc, the Alberta Court of Queen’s Bench addressed the enforceability of electronic signatures under the Electronic Transactions Act. The court confirmed that electronic signatures can be legally binding, provided they meet requirements to identify the signee and demonstrate their intent to be bound by the contract. This decision highlights the growing acceptance of digital processes in contract formation and performance in Alberta.

As technology continues to advance at an accelerated pace, it is highly probable that we will witness a further surge in contract disputes stemming from the utilization of technology.

The Globalization of Commerce and Cross-Border Transactions:

The increasing globalization of business has led to a surge in cross-border commercial contracts. This trend can lead to complex jurisdictional issues, choice of law questions, and challenges in enforcing judgments across diverse jurisdictions. As cross-border transactions become increasingly commonplace, it is imperative for businesses to be cognizant of the inherent legal risks and to implement proactive measures to mitigate these risks.

The Rise of International Commercial Arbitration:

International commercial arbitration has emerged as a popular alternative to traditional litigation for resolving cross-border commercial disputes. Arbitration offers several advantages, including neutrality, efficiency, and expertise. As cross-border transactions continue to increase, we are likely to see a corresponding increase in the use of international commercial arbitration.

In the Supreme Court of Canada case Uber Technologies Inc. v. Heller, the court invalidated the disputed contract’s mandatory arbitration clause. This was due to the clause’s unfair nature, as it mandated disputes arising from the contractual agreement to be resolved through mediation and arbitration in the Netherlands. This was deemed to be an unreasonable barrier for a regular Canadian Uber Driver.

Sustainable Business Practices:

There is a growing focus on sustainable business practices, including environmental, social, and governance (ESG) factors. This trend is likely to impact commercial contracts, as parties may include provisions in their contracts relating to ESG issues. For example, a contract may include provisions requiring the parties to comply with certain environmental standards or to make efforts to reduce their carbon footprint.

Artificial Intelligence and Machine Learning:

Artificial intelligence (AI) and machine learning are increasingly being used in commercial transactions, such as contract negotiation and analysis. While these technologies offer the potential to improve efficiency and accuracy, they also raise new legal challenges, such as liability, intellectual property, and data privacy issues. As AI and machine learning become more prevalent, businesses must be aware of these technologies’ legal implications.

In 2023, both the Yukon and Manitoba courts issued directives requiring parties to disclose their use of AI tools in legal research and submissions. These directives aim to ensure transparency and address concerns about the reliability of AI-generated content, as highlighted by a high-profile U.S. case where lawyers submitted fictitious case law created by ChatGPT. This development underscores courts’ cautious yet anticipatory approach to AI’s growing role in legal processes​

Evolving Contract Law in Alberta

Commercial contract disputes in Alberta are becoming increasingly complex and multifaceted. Businesses operating in the province must be mindful of the legal principles that govern these matters and prepared to navigate the evolving landscape of commercial litigation. By understanding the key legal principles, emerging trends, and potential challenges, businesses can mitigate risks, protect their interests, and effectively resolve disputes.

Calgary and Strathmore Business Lawyers Advise Clients on Complex Contract Disputes

Contracts are the backbone of any business, but navigating their complexities can be challenging, particularly when disputes or unclear terms arise. Whether you are negotiating an agreement, addressing a breach, or resolving disputes, having experienced legal guidance is essential to protecting your interests. Getz Collins and Associates, with offices in Calgary and Strathmore, Alberta, specialize in business law, civil litigation, and employment law, offering tailored advice to meet your unique needs. Contact us today at (587) 391-5600 or online to schedule a consultation and ensure your business is on solid legal footing.