eCaseNote 2023 No. 01
The recent decision in Spot Coffee Park Place Inc. v. Concord Adex Investments Limited, 2023 CarswellOnt 268 (Ont. C.A.) has generated significant debate in the commercial leasing bar. In this case, the tenant, Spot Coffee, sued the landlord for negligent pre-contractual misrepresentations made by the landlord's leasing representative. The landlord argued that the "Entire Agreement" clause in the lease agreement excluded any liability for these representations.
The essence of an "Entire Agreement" clause is to ensure that the signed document is the final and complete agreement between the parties, eliminating liability for any previous discussions or statements of intent on business terms. This avoids confusion or disputes about the contract's terms and protects both parties from claims based on earlier conversations so that only the written contract can be relied upon. This eCaseNote examines the impact of this decision on "Entire Agreement" clauses in pre-contractual representations.
InSpot Coffee, a landlord solicited an existing tenant to lease another location in a new building that the landlord was then constructing. As part of those solicitations, the tenant was offered 150 spots of "free, close, accessible parking," and dedicated elevator access to the retail lobby. None of these representations proved to be accurate, and the tenant claimed damages as a result.
The landlord primarily relied in defence on the "Entire Agreement" clause in the lease. However, the court held that the landlord was nevertheless liable for negligent misrepresentation.
The Court focused on the "Entire Agreement" clause in the lease agreement. The Court noted that a properly drawn "Entire Agreement" clause can protect contracting parties from liability for any incorrect pre-contract representations and noted that a tort claim such as misrepresentation will not be considered by a Court if it effectively allows a plaintiff to evade a contractual exclusion or limitation of liability for an act or omission that would constitute the tort. Essentially, tort liability can be limited or excluded in law by an "Entire Agreement" clause.
The Court then turned to the adequacy of the "Entire Agreement" clause in the lease agreement and noted that clear terms in the "Entire Agreement" clause are necessary to preclude tort liability. Therefore, the first question was whether the pre-contractual representation at issue was expressly addressed in the lease agreement. If so, then tenant could not bring this action in tort.
The Court found that the "Entire Agreement" clause in the lease agreement was insufficient to cover the parking promises made by the landlord. According to the Court, because the lease agreement was otherwise silent as to customer parking, it followed that parking was not part of the subject matter of the lease agreement and, as a result, was outside of the protection afforded by the "Entire Agreement" clause.
TheSpot Coffeecase has practical implications in commercial leasing. The case highlights the importance of carefully drafting "Entire Agreement" clauses and addressing ancillary matters in the lease. The wider business community should also take note if the Court's rationale can be applied outside the strict leasing context.
TheSpot Coffeecase also raises an interesting issue about the control of parking in commercial properties. The court found that parking is not inherently part of the leasing of commercial properties, even if there are generic provisions relating to common areas. This finding may have implications for commercial premises or condominiums that control parking through generic provisions governing common elements and probably even residential properties.
If parking is not specifically included in the lease or the condo's by-laws or declarations, then landlords and condominium associations may not have authority to control it. This will be another interesting issue to watch.
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