READING CONTRACTS AGAINST THE DRAFTER

Published: June 13, 2026 | Updated: July 7, 2026 | By: Roger Baker 7 min read

When a contract is ambiguous and the ordinary tools of interpretation cannot resolve it, Canadian courts read the ambiguity against the party who drafted it. The rule is called contra proferentem, and the Supreme Court of Canada confirmed its place in the modern law of contract interpretation in a case about scratched windows worth $2.5 million. Two decisions of the Court define how contract interpretation works in Canada today. Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 ("Sattva") sets out the modern method, under which words are read in context, as a whole, in light of the circumstances in which the contract was made. Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37 ("Ledcor") shows the toolkit applied, step by step, to a standard form insurance policy.

This article walks through the rules of construction the courts actually use, and makes an argument along the way. Contra proferentem is not a relic or an embarrassment. In our view, it is a rule of construction like any other, with its own trigger, and Ledcor shows the Supreme Court treating it exactly that way.

The Modern Approach: Words in Context

Sattva is the starting point for every contract interpretation question in Canada. The decision-maker must "read the contract 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" (Sattva at para 47). The goal is the parties' objective intention, not what either side privately hoped the words meant.

The dispute in Sattva was about money riding on a single definition. A finder was entitled to a US$1.5 million fee payable in shares, and the contract's "Market Price" definition determined whether those shares were priced at $0.15 or $0.70, a difference of roughly nine million shares (Sattva at paras 2 and 7–8). Context, not grammar alone, settles questions like that. The Court held that interpretation "has evolved towards a practical, common-sense approach not dominated by technical rules of construction," with the overriding concern being "the intent of the parties and the scope of their understanding" (Sattva at para 47).

Context has limits, though. The surrounding circumstances "must never be allowed to overwhelm the words" of the agreement, and a court "cannot use them to deviate from the text such that the court effectively creates a new agreement" (Sattva at para 57). The evidence must also be objective, limited to facts both parties knew or reasonably ought to have known when they signed, not their subjective intentions (Sattva at paras 58–59).

That phrase, "not dominated by technical rules of construction," is easy to over-read. It describes which consideration leads the analysis. It does not abolish the rules of construction, and Ledcor shows them doing decisive work two years later.

An Ordered Toolkit, Not a Free-for-All

The rules of construction operate in a sequence, and each rule has its own domain. Ledcor, drawing on the Court's earlier insurance decision in Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, sets out the order for interpreting insurance policies in three steps. First, clear language wins. Where the policy's language is unambiguous, the court gives effect to that clear language, "reading the contract as a whole" (Ledcor at para 49). There is no resort to any other rule, because there is nothing to resolve.

Second, if the language is ambiguous, the general rules of construction come in. The interpretation should be consistent with the parties' reasonable expectations, so long as the language supports it; it should avoid results that are unrealistic or that the parties would not have contemplated in the commercial atmosphere; and it should be consistent with how similar policies have been interpreted (Ledcor at para 50). Third, contra proferentem. "Only if ambiguity still remains after the above principles are applied can the contra proferentem rule be employed to construe the policy against the insurer" (Ledcor at para 51). The Latin name means read against the offeror. A corollary of the rule, the Court added, is that "coverage provisions in insurance policies are interpreted broadly, and exclusion clauses narrowly" (Ledcor at para 51).

Ledcor: The $2.5 Million Window-Cleaning Job

During construction of the EPCOR Tower in Edmonton, the building's installed windows were dirtied with paint, dirt, and concrete splatter. The owner, Station Lands Ltd., hired Bristol Cleaning to do a construction clean for $45,000. Bristol used improper tools and methods, scratched the windows, and the windows had to be replaced at an estimated cost of $2.5 million (Ledcor at paras 6–8 and 80). The owner and the general contractor claimed the replacement cost under the project's builders' risk policy. The insurers denied coverage, relying on a standard form exclusion for the "cost of making good faulty workmanship," which carved back in any "physical damage not otherwise excluded" that "results" from the faulty work (Ledcor at paras 8 and 10).

The trial judge found the exclusion ambiguous. The insureds' reading (only the cost of redoing the cleaning is excluded) and the insurers' reading (the damaged windows are excluded too) were equally plausible. He applied contra proferentem against the insurers and found coverage (Ledcor at para 12). The Alberta Court of Appeal reversed, holding that the clause was not ambiguous at all, that contra proferentem had been improperly applied, and that a new test of "physical or systemic connectedness" should govern (Ledcor at paras 13–14).

The Supreme Court restored the result in favour of the insureds. The majority agreed the clause was ambiguous, but found the general rules of construction resolved the ambiguity. The exclusion reaches only the cost of redoing the faulty work, here the recleaning, so the window replacement was covered as resulting damage (Ledcor at paras 61–63).

On that approach, the Court said "it is not necessary to turn to the contra proferentem rule" (Ledcor at para 64). The rule did not sit out, though. The majority gave a second, independent basis for the same result, one that would decide the appeals even if the general rules had failed to resolve the ambiguity:

"In any event, even if I were to determine that the general rules of contractual interpretation do not clarify the ambiguous Exclusion Clause, I would reach the same conclusion on the basis of the contra proferentem rule." (Ledcor at para 96)

Justice Cromwell, concurring in the result, went further still. He would have upheld the trial judge's analysis outright, an analysis that reached the outcome through contra proferentem itself. The trial judge applied the general rules, found they did not produce a clear answer, and "therefore applied the contra proferentem principle, interpreted the clause against the insurers and held that the exclusion did not apply. I see no reviewable error in this analysis" (Ledcor at para 127).

Is Contra Proferentem a Second-Class Rule?

In our view, no. Every rule of construction has its own domain. Plain meaning governs when the language is clear, the general rules govern when it is not, and contra proferentem governs when ambiguity survives everything else. Describing the rule as a "last resort" identifies its trigger; it says nothing about its force once triggered. When the conditions are met, the rule decides the case, as Ledcor proves. The majority was prepared to decide the appeals on contra proferentem in the alternative, and Justice Cromwell saw no error in the trial judge having done exactly that. Every judge who reached the question was willing to give the rule effect, at the highest court in the country.

Neither Sattva nor Ledcor addresses the point expressly, but in our view a further implication follows. Arguably, nothing about contra proferentem requires privity of contract, since it is a rule of construction available to anyone the document covers. In Ledcor, the policy was issued in favour of the owner and "all contractors involved in the construction," a class of insureds who never negotiated, signed, or paid for the contract (Ledcor at paras 1–2). At every level of court, the rule was treated as available in those insureds' favour, and no judge suggested that any particular insured's relationship to the insurers mattered. The rule follows the drafter, not the relationship. The party who chose the words bears the risk of their ambiguity, whoever ends up relying on them.

The stakes here are higher than they used to be. Ledcor also held that the interpretation of a standard form contract is a question of law reviewed on appeal for correctness, because the interpretation has value as precedent, and "may be applied in future cases involving identical or similarly worded provisions" (Ledcor at para 43). A construction fixed against a drafter does not stay between the original litigants. It attaches to the wording, and future parties, strangers to the original contract, inherit it.

What This Means If You Draft (or Sign) Standard Terms

For businesses that put their own paper forward, ambiguity in the standard terms is your risk. Careful drafting is the only cure. Because the interpretation of standard form wording carries precedential value, a single adverse construction may fix the meaning of that wording across every contract in which it appears.

For parties on the receiving end of standard terms, the sequence runs the other way. Clear language is enforced as written. But where a clause is genuinely ambiguous, and the general rules of construction do not resolve it, the ambiguity may be construed against the drafter. In the insurance context the tilt is built in. Coverage provisions are read broadly and exclusions narrowly, so a denial of coverage that rests on an ambiguous exclusion deserves careful scrutiny before it is accepted.