Background
Central College Healthcare Centre Inc. subleased commercial premises in Vancouver to Access West Holdings Inc. A related company, Quantum Parcel Services Ltd., signed an indemnity document stating that it would indemnify Central College for Access West’s performance of all covenants and agreements under the offer to sublease and the sublease. The document also required Quantum to deliver a separate agreement confirming the indemnity.
After a dispute over early occupancy, Access West purported to terminate the sublease. Central College accepted the repudiation while reserving its rights to damages and indemnification. On summary trial, the Supreme Court of British Columbia found that Access West had breached the sublease and that Quantum was jointly and severally liable for $280,933.23 under the indemnity. The appellants challenged only the ruling that the indemnity was enforceable, not the breach finding or damages assessment.
The Court’s Holding
The Court of Appeal dismissed the appeal. It held that the summary trial judge made no reversible error in finding a binding indemnity agreement. The first sentence of the indemnity clause contained an unequivocal promise by Quantum to indemnify Central College. The requirement for a later document merely contemplated confirmation of that existing obligation; it was not a condition precedent and did not reduce the instrument to an unenforceable agreement to agree.
The indemnity was sufficiently certain because it identified the parties and made Quantum’s obligations co-extensive with Access West’s obligations under the sublease. Quantum could not plausibly claim ignorance of those obligations, as the same director signed both documents for the related companies. Contra proferentem did not apply because the trial judge found no genuine ambiguity. Nor did Central College waive the indemnity by allowing the sublease to continue without a confirmatory agreement: its unexercised contractual option to terminate was not a relinquishment of its existing indemnity rights.
Key Takeaways
- An agreement may be immediately binding even when the parties contemplate a later formal document.
- A later-document clause is not a condition precedent unless the contract, properly interpreted, makes execution of that document a prerequisite to legal obligations.
- Contra proferentem applies only after ordinary interpretive principles leave a genuine ambiguity, and declining to exercise a discretionary termination right does not by itself waive an existing indemnity.
Why It Matters
The decision reinforces that courts determine contractual enforceability from the document as a whole and the parties’ objectively expressed intention, not from isolated references to a future agreement. Commercial parties may therefore be bound by an informal or preliminary instrument once they have agreed on all essential terms and manifested an intention to be bound.
For parties drafting guarantees or indemnities, the case also illustrates the importance of stating expressly whether a later formal agreement is only confirmatory or is a true condition precedent to liability.