{"id":27463,"date":"2025-02-11T09:30:00","date_gmt":"2025-02-11T14:30:00","guid":{"rendered":"https:\/\/www.millerthomson.com\/?p=27463"},"modified":"2025-02-11T09:24:34","modified_gmt":"2025-02-11T14:24:34","slug":"applying-contractual-interpretation-principles-to-commercial-retainer-agreements-what-business-leaders-need-to-know","status":"publish","type":"post","link":"https:\/\/www.millerthomson.com\/en\/insights\/commercial-litigation\/applying-contractual-interpretation-principles-to-commercial-retainer-agreements-what-business-leaders-need-to-know\/","title":{"rendered":"Applying contractual interpretation principles to commercial retainer agreements: What business leaders need to know"},"content":{"rendered":"\n

Avoiding costly disputes regarding commercial retainer agreements<\/h2>\n\n\n\n

Service providers often enter into commercial retainer agreements or engagement letters outlining the scope of the services being provided. As demonstrated in A5 Investments Inc v Pro-Pipe Service & Sales Ltd,<\/em>[1]<\/a> courts have developed legal principles specific to commercial contracts and, in particular, the interpretation of retainer agreements and broker arrangements. As the application of these principles may determine whether one is entitled to payment for services rendered, commercial parties should be aware of the manner in which courts interpret such agreements.<\/p>\n\n\n\n

Background<\/h2>\n\n\n\n

Pro-Pipe Service & Sales Ltd (\u201cPro-Pipe<\/strong>\u201d), a corporation providing downhole tubulars for the oil and gas industry, engaged A5 Investments Inc (\u201cA5<\/strong>\u201d) for the provision of financial planning services and for assistance in obtaining project financing.[2]<\/a> The parties subsequently entered into an engagement letter whereby A5\u2019s compensation was to be on a commission-only basis. Specifically, A5 was to receive 6% of the total financing amount that Pro-Pipe \u201crequired and agreed to obtain\u201d, or alternatively, 8% of the total financing if the amount obtained was more than Pro-Pipe required but which it agreed to receive (the \u201cRetainer Agreement<\/strong>\u201d).[3]<\/a><\/p>\n\n\n\n

Pursuant to the Retainer Agreement, A5 brokered several credit facilities on Pro-Pipe\u2019s behalf from Canadian Western Bank (\u201cCWB<\/strong>\u201d). The parties disagreed as to whether a line of credit in the amount of $1,300,000 (the \u201cEquipment Line<\/strong>\u201d) was financing that Pro-Pipe \u201crequired and agreed to obtain\u201d under the Retainer Agreement.<\/p>\n\n\n\n

In emails to A5, Pro-Pipe alleged that it had not been presented with a term sheet for the Equipment Line and, therefore, had not had an opportunity to review or accept its content.[4]<\/a> Pro-Pipe thus denied that the Equipment Line was financing that it \u201crequired and agreed to obtain\u201d under the Retainer Agreement. A5 subsequently brought action against Pro-Pipe, alleging it was owed commission in the amount of 6% of the Equipment Line\u2019s financing.<\/p>\n\n\n\n

The sole issue before the court was whether the Equipment Line was financing that Pro-Pipe \u201crequired and agreed to obtain,\u201d such that A5 was entitled to compensation pursuant to the Retainer Agreement. The matter proceeded by way of summary trial, wherein no witnesses were called and the parties agreed that their respective affidavits would constitute the sole evidence to be considered by the court.[5]<\/a><\/p>\n\n\n\n

Key legal principles applicable to retainer agreements<\/h2>\n\n\n\n

The court\u2019s decision was guided by the legal principles of contractual interpretation, as established by the Supreme Court in Sattva Capital Corp v Creston Moly Corp<\/em>:<\/p>\n\n\n\n