Canadian contract law is composed of two parallel systems: a common law framework outside Québec and a civil law framework within Québec. Outside Québec, Canadian contract law is derived from English contract law, though it has developed distinctly since Canadian Confederation in 1867. While Québecois contract law was originally derived from that which existed in France at the time of Québec's annexation into the British Empire, it was overhauled and codified first in the Civil Code of Lower Canada and later in the current Civil Code of Quebec, which codifies most elements of contract law as part of its provisions on the broader law of obligations. Individual common law provinces have codified certain contractual rules in a Sale of Goods Act, resembling equivalent statutes elsewhere in the Commonwealth. As most aspects of contract law in Canada are the subject of provincial jurisdiction under the Canadian Constitution, contract law may differ even between the country's common law provinces and territories. Conversely; as the law regarding bills of exchange and promissory notes, trade and commerce (including competition law), maritime law, and banking among other related areas is governed by federal law under Section 91 of the Constitution Act, 1867; aspects of contract law pertaining to these topics (particularly in the field of international shipping and transportation) are harmonised between Québec and the common law provinces.
Interpretation
Contracts in all Canadian jurisdictions are generally interpreted in a manner that balances giving the fullest possible effect to the intent of the parties while protecting the public interest and contracting parties with less bargaining power. Canadian courts, particularly each province's superior court, are responsible for the interpretation of contracts in legal disputes. Outside Québec, the rules of contractual interpretation are established by judicial precedent and broadly resemble those in other Commonwealth jurisdictions. Within Québec, the rules of contractual interpretation are codified in the civil code.
In Québec, the civil code provides several specific rules regarding contractual interpretation in Book Five, Title One, Chapter 2, Division 4. Section 1425 provides that the common intention of the contracting parties shall be prioritised over the literal meaning of the words in a written document purporting to embody the contract Section 1426 requires courts to take into account a contract's nature, the circumstances in which it was formed, customs and usages, and any prior interpretation it may have received. Each clause of a contract is required by section 1427 to be interpreted in the context of the others so that each is given a meaning derived from the contract as a whole. While section 1430 provides that a clause intended to eliminate doubt as to the application of the contract to a specific situation does not restrict the scope of a contract otherwise expressed in general terms, section 1431 provides that the clauses of a contract cover only what it appears that the parties intended to include, however general the terms used. Section 1432 codifies the English doctrine of contra proferentem.
Formation and validity
Québec
The rules governing the formation of a contract under Québecois law are codified in Book Five, Title One, Chapter 2, Division 3 of the Civil Code. Except where a specific provision of law requires otherwise, a contract is formed by the exchange of consent between persons with the capacity enter into a contract. Additionally, a valid contract must have a cause and an object. The cause of a contract is the reason that determines each of the parties to enter into the contract, and does not need to be explicitly expressed in the contract. The object of a contract is the juridical operation (i.e. exchange of one or more legal rights) contemplated by the parties at the time of the contract's formation. An object is only valid if it is not prohibited by law or on grounds of public policy. A contract which does not meet the conditions of its formation may be annulled .