“At ¶ 47 of Sattva Capital Corp.v. Creston Moly Corp., 2014 SCC 53, the Supreme Court succinctly set out the principles of contractual interpretation. The Court adopted the “modern approach” holding that the interpretive process involves reading the agreement “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.” There need not first be a finding of ambiguity in the contract, before the Court can consider surrounding circumstances.
Also at ¶47 of of Sattva Capital Corp.v. Creston Moly Corp., the Court recognized the difficulty of ascertaining contractual intention when looking at the text alone, because words alone do not have an “immutable or absolute meaning”. The Court quoted a passage that contracts are not made in a “vacuum”, and must be placed in context of the setting in which they are made.
At ¶48 of of Sattva Capital Corp.v. Creston Moly Corp., the Court found that the meaning of words is derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement. The meaning which a document would convey to a “reasonable man” is not necessarily the same thing as the meaning of the words used in the contract, themselves. In this case before me, the parties have to some extent made statements about their subjective intentions in making and accepting the Offer to Settle, but the goal in contractual in contractual interpretation is to ascertain the objective intent of the parties: see ¶ 49 of of Sattva Capital Corp.v. Creston Moly Corp.
Although the surrounding circumstances may be considered, they should not be allowed to overwhelm the words of the agreement. Rather, they should “deepen the decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract”. The interpretation must be grounded in the text,and read in light of the entire contract: see ¶57 of of Sattva Capital Corp.v. Creston Moly Corp.
What the surrounding circumstances may be, will vary. They should consist of objective evidence of background facts known at the time of execution of the contract. That knowledge must have either been, or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Surrounding circumstances can be “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man”: see ¶58 of of Sattva Capital Corp.v. Creston Moly Corp.”