Assessing Exclusion Clauses: The Supreme Court of Canada\u27s Three Issue Framework in Tercon Contractors Ltd v British Columbia (Transportation and Highways)

The Supreme Court of Canada\u27s 2010 decision in Tercon Contractors Ltd v British Columbia (Transportation and Highways) concerned the enforceability of a broadly drafted exclusion clause in the context of public procurement tendering. It is noteworthy for several reasons. First, the decision unanimously articulated a three-issue framework for determining the enforceability of exclusion clauses. Second, and on a more theoretical front, Tercon offered competing visions as to how contracts are to be interpreted. Though the Supreme Court was unanimous that parties to a contract should-of course-generally be bound by its terms, the majority and dissent followed significantly different paths for determining the scope of the agreement at bar. Justices LeBel, Deschamps, Fish, Charron, and Cromwell (in a majority decision delivered by Cromwell J.) approached the task of contractual interpretation by elevating the long-standing and judicially enforced values that specifically inform the tendering process2 including notions of integrity, transparency, and business efficacy. The dissent, per McLachlin C.J., Binnie, Abella, and Rothstein JJ., in a judgment delivered by Binnie J., emphasized another set of long-standing andjudicially enforced values, namely freedom of contract and fidelity to the legal principle that contracts are to be enforced according to their words. And third, the Supreme Court of Canada laid to rest the doctrine offundamental breach as it applies to exclusion clauses-or attempted to at least