How do Ontario courts interpret ambiguous contract language?

When a commercial contract contains ambiguous language, Ontario courts follow established principles of contract interpretation to determine what the parties actually intended. The starting point is the plain and ordinary meaning of the words, read in the context of the contract as a whole. Courts do not read clauses in isolation.

If the plain meaning is ambiguous, courts consider the factual matrix — the objective circumstances surrounding the contract when it was made — to understand what the words were intended to convey. This includes the commercial purpose of the agreement and the absurdity of any particular interpretation.

The rule of contra proferentem provides that ambiguity is resolved against the party who drafted the ambiguous language. This is a last resort, however; courts prefer finding a reasonable meaning rather than defaulting to contra proferentem. Courts do not rewrite contracts to give a party a better deal than it negotiated.

Extrinsic evidence — prior negotiations, draft versions, post-signing conduct — is generally not admissible to contradict clear written terms, but it may be used to resolve genuine ambiguity. Clear, precise drafting is always the best protection against a court interpreting your contract in a way you did not intend.