The factual matrix is an argument that a lawyer can make. It involves the interpretation of a contract. The factual matrix simply means looking at all the circumstances that take place.
If a contract is not clear, a judge will have to decide what it is meant to mean. Because Canada is a “common law” British system of law, our legal system always evolves.
The courts need to look at contracts and make decisions on the terms that are unclear. Other times, the courts have to make a decision about terms that were not in the agreement.
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Looking At The Contract As A Whole
Sometimes one party will urge the reading of a contract on sound commercial principles. They might say that a certain interpretation of a clause in a contract would be commercially absurd.
This might be because they would have to pay out more money than any potential upside. The lawyer might want the judge to consider the factual matrix and the reading of the contract as a whole.
The law governing the proper approach to the construction of contracts is well settled:
(a) The objective intention of the parties to a contract is to be determined from the words used in the document.
(b) The starting point is to examine the words used, in the context of the contract as a whole, in order to see whether they are clear and unambiguous. Water Street, (supra).
(c) The surrounding circumstances, often referred to as the factual matrix, at the time that the contract was entered into and which were known or ought to have been known by the parties to the contract, may be used to assist in this initial interpretative effort provided that the consideration of the surrounding circumstances does not overwhelm or contradict the words employed.
(d) An interpretation of the contract that promotes a sensible commercial result should be favoured.
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Looking At The Factual Matrix
Some companies might also rely on the principle of contra proferentum given the evidence that the opposing party drafted the Agreement. The judge might agree with the other parties’ submission.
This might be in reply that where the ordinary rules of construction are sufficient to determine the objective intent of the parties it is unnecessary to resort to the doctrine of contra proferentum.
Below is a real factual matrix dispute. We have changed the names and the facts.
The question of whether the “event” under the Agreement occurred, in some cases, turns on the proper interpretation of the contract.
ABC Company said the event triggering payment of the commission under an Agreement is simply ZXC Company entering into a new franchise agreement, regardless of whether ABC Company had any involvement whatsoever in bringing the new franchisee to ABC Company.
For its part, ZXC Company argues that more is required under the Agreement. The event triggering payment to ABC Company is ZXC Company entering into a new franchise agreement with a franchisee referred to ZXC Company by ABC Company.
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Author: Alistair Vigier is the CEO of ClearWay Law