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Lessons from Impero Inc v 1035352 Alberta Ltd
Written contracts govern most business arrangements. To ensure that agreements meet the expectations of the parties, Courts in Alberta and Canada have developed certain rules. In this blog post, I will briefly outline the rules related to contractual interpretation and explain how these rules were applied in a recent Alberta King’s Bench case.
How Courts Interpret Contracts
Contractual interpretation is “for the most part, an exercise in giving effect to the intentions of the parties. … Accuracy in interpretation requires consideration of two things, namely the words selected by the parties to set out their agreement, and the context in which those words have been used”.[1] Courts will attempt to find the meaning within the constraints of the words in the contract and their context.[2] The first step in the interpretation analysis will be to look at the words of the contract. The second step (if required) is to look at the context surrounding the contract. Context may be broken out into two distinct parts: (i) interpretation of the word or group of words as compared to the document as a whole, and (ii) analysis of the surrounding circumstances which give rise to the contract.[3] While the surrounding circumstances are relied upon, Courts cannot use the surrounding circumstances to contradict the words of an agreement to effectively create a new one.[4]
The Alberta King’s Bench recently applied these principles in a decision released in October 2025, called Impero Inc v 1035352 Alberta Ltd, 2025 ABKB 605 (“Impero”).
Summary of Impero
In Impero, the Alberta King’s Bench interpreted terms of a commercial lease (the “Lease”). Approximately a year into the Lease term, both the landlord and the tenant under the Lease received noise complaints from tenants of an adjacent residential property. During the second year of the Lease term, the landlord terminated the lease, alleging that the tenant was in breach of the following provisions in the Lease: (i) the noise restrictions, and (ii) permitted use.[5]
At trial, evidence was presented that: the tenant operated as a restaurant, lounge, and hookah lounge during the day until 12 midnight during the week and 3 am on weekends; alcohol was served at the lease premises and minors were prohibited after 10 pm; and on weekends, the tenant hosted parties that continued until the early morning.[6]
Court’s Analysis and Interpretation
(i) Alleged Breach of Noise Restrictions
The Court found that nothing in the Lease restricted the tenant’s activities or its customers’ activities (including with respect to noise) outside the leased premises. The Court found that minimal or no noise escaped the leased premises and as a result, the tenant did not breach the noise restrictions in the Lease.[7]
The noise restrictions in the Lease were clear. If the landlord and tenant intended for the noise restrictions to apply to the areas surrounding the leased premises, the provisions in the Lease should have restricted noise in surrounding areas as well. In its interpretation of the noise restrictions in the Lease, the Court did not need to venture outside of the words of the Lease.
(ii) Alleged Breach of Permitted Use
The permitted use provision in the Lease was:
“The Tenant shall not use or occupy the leased premises or any part thereof for any purposes other than the continuous operation of a Restaurant, Lounge and such other use(s) as may be first approved in writing by the Landlord.”[8]
The landlord argued that the tenant operated a “nightclub”, rather than a “restaurant” or “lounge”. The words “nightclub”, “restaurant” and “lounge” were not defined in the Lease. The Court determined that in the context of a commercial Lease and where the immediately preceding word is “restaurant”, the word “lounge” has a broad meaning including a place where customers sit and order and consume food, drink or both. Because the Lease used broad language, the Court also considered the surrounding circumstances known to the parties when they signed it. The Court considered evidence of verbal communications between the tenant and the landlord as well as the tenant’s business plan and floor plan provided to the landlord before signing the Lease. The Court also reviewed the development permit application related to the leased premises, which both parties were aware of prior to entering into the Lease. The business plan referenced hosting parties, having a hookah lounge, and catering to customers over the age of 18. The Development Permit included a drawing setting out the proposed arrangement of the leased premises, which showed the location for a DJ and in which most of the seating in the leased premises was at the bar and the lounge. Given this context, the Court concluded that the tenant and the landlord should have anticipated noisy customers leaving weekend parties on the leased premises and the tenant was operating a restaurant and lounge within the objective meaning of those words in the Lease.[9]
Key Lessons for Drafting and Review
The rules related to contractual interpretation and the decision in Impero are important for both businesspeople and lawyers to understand. In short, clear drafting can reduce the need for interpretation, while ambiguous drafting may invite courts to examine the context of the contract and broader commercial context more thoroughly.
This means that the words of a contract, particularly related to commercial terms that are unique to a given arrangement, should be reviewed thoroughly by all parties to ensure that each party’s intentions are reflected accurately. Further, parties must carefully review the documentation provided to them and all correspondence with the other party prior to entering into an agreement to ensure that it aligns (objectively) with their intentions reflected in the written agreement.
[1] Golden Capital Securities Ltd v Investment Industry Regulatory Organization of Canada, 2010 BCCA 359
[2] Geoff R Hall, Canadian Contractual Interpretation Law, 4th ed (Toronto: LexisNexis Canada Inc, 2020).
[3] Leggett & Platt Canada Co/Societe Leggett & Platt Canada v Brink Forest Products Ltd, 2010 BCCA 14 at paras 20 and 21.
[4] Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53.
[5] Imperoat paras 2-10.
[6] Impero at paras 42-43.
[7] Impero at paras 42-44.
[8] Impero at para 3.
[9] Impero at paras 47-64.
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.
