Restrictive Covenants - Detailed Analysis
Last Updated: October 2022
In order to obtain rectification of a contract, “it is necessary to show that the parties were in complete agreement on the terms of their contract, but by an error wrote them down wrongly.”1 Thus, in Shafron, there was no evidence of a prior agreement that explained the term “Metropolitan City of Vancouver” and hence the doctrine of rectification could not be applied.2
In another case, the Alberta Court of Appeal likened the construction of restraints of trade to the construction of exception clauses and, in refusing to rectify an ambiguous covenant, cited the following from Cheshire and Fifoot’s Law of Contract (8th edition) at p. 140:
A party to a contract who inserts a term designed for his protection, must make his meaning clear; and if he fails to do so, his words will be read against him. This is a readily intelligible canon of construction, without as well as within the law, and requires neither to be excused nor classified.3
Despite the foregoing, there have been cases where the courts have been prepared to apply rectification to a restrictive covenant. In Dynamex v. Miller,4 the Newfoundland Court of Appeal upheld a decision rectifying a non-solicitation clause. The parties had omitted the actual words of restriction in the agreement. However, evidence led at trial suggested that the individual, a courier driver, had attended a meeting where it had been explained to drivers that under new independent contractor agreements, they would be prohibited from soliciting the customers of the company for 12 months if they left the company for any reason. There was also evidence that, subsequent to leaving the company, the driver admitted to one of those customers that he was not supposed to solicit former customers, as he had signed an agreement to that effect. Based on this uncontradicted evidence, the trial judge found that “it was believed to be, by both parties, an agreement binding upon them to restrict the defendant from soliciting customers of the plaintiff.”5
- Frederick E. Rose (London) Ld. v. William H. Pim Jnr. & Co.,  2 Q.B. 450 (C.A.), cited with approval in Shafron v. KRG Insurance Brothers (Western) Inc.,  1 SCR 157, 2009 SCC 6 (CanLII), at para. 52.
- Shafron v. KRG Insurance Brokers (Western) Inc.,  1 SCR 157, 2009 SCC 6, at para. 52.
- cited in Reed Shaw Osier Limited v. Wilson, 1981 ABCA 317 (CanLII) at para. 35.
- Dynamex Canada Inc. v. Miller, 1998 CanLII 18094 (NLCA), affirming 1997 CanLII 15963 (NLSCTD).
- Dynamex Canada Inc. v. Miller, 1998 CanLII 18094 (NLCA), affirming 1997 CanLII 15963 (NLSCTD), para. 12.