An appeal involving the proper construction of entire agreement and related clauses in a contract. Reported in the November 5, 2004 edition of The Lawyers Weekly.
In March 2000, Asan and Barbara Dzourelov contracted with T.B. Bryk Management and Development Ltd. for the construction of a custom-built home. The agreement said that about 1,000 square feet of the basement would be finished with a layout to be confirmed by the purchasers. It also provided that "extras" (with some examples being given) were to be "priced separately." At closing in August 2000, the builder asked for an extra $13,636.73 for finishing an additional 570 square feet in the basement.
The purchasers objected, saying they never agreed to have the additional space finished. Before closing, the parties negotiated a reduction to $9,544.30. The buyers paid the money and closed under protest. They then successfully sued in Small Claims Court to recover the amount they claimed they overpaid.
The builder appealed to the Divisional Court.
There, Justice Dawson reversed the decision of the lower court, and ruled that the builder was entitled to receive the entire $9544.30. His decision was based on a 2003 Ontario Court of Appeal ruling dealing with "entire agreement" clauses. In the case of Shelanu v. Print Three, the appeal court said that if the conduct of the parties makes clear that the written agreement no longer reflects their full intentions, the entire agreement clause can be ignored. It can also be ignored if it would result in "substantial unfairness."
In the Dzourelov case, it appeared at trial that there was a subsequent verbal agreement about the extra basement space. The original written purchase agreement required that 1000 square feet of basement be finished. It was silent about the extra 570 square feet.
The Divisional Court ruled that since the later agreement about the 570 square feet was not in any way inconsistent with the original agreement, it became a separate agreement and not an amendment to the original agreement.
Dzourelov v. T.B. Bryk Management and Development Ltd, 2004 CanLII 32472 (ON S.C.D.C.)