In late 2025, the Court of Appeal for Saskatchewan released its decision in 101011333 Saskatchewan Ltd. v Vern’s Pizza,1 upholding the lower court’s decision in favour of Saskatoon-based Vern’s Pizza Company Ltd. (Vern’s Pizza). The decision reaffirmed the findings of the Saskatchewan Court of King’s Bench on contractual interpretation and the duty of honest performance, and once again offers a cautionary tale to franchisors on the importance of careful drafting.
Cassels previously published a comprehensive summary of the lower court’s decision in Vern’s Pizza Company Limited v 101011333 Saskatchewan Ltd.,2 which can be found here.
Background
Vern’s Pizza and its franchisee, 101011333 Saskatchewan Ltd. (the Franchisee), entered into a single franchise agreement under which the Franchisee operated two Vern’s Pizza restaurants at two separate locations. After more than a decade, one of the underlying leases for one of the locations ended after the property was sold. Vern’s Pizza took the position that the loss of that lease terminated the entire franchise agreement, while the Franchisee argued that the agreement remained in force for the second location. Despite the dispute, the franchisee continued to operate the remaining restaurant and to pay royalties.
The conflict ultimately arose from a drafting error in the termination clause. The termination clause did not include the addresses of both locations but instead included the square-bracketed term “[address of the premises to be used as the restaurant]” – an apparent missing entry in the standard form contract. Although both parties agreed that the clause should have included both locations, they disagreed as to whether the clause should have included the words “and” or “or” between the two premises.
Applying standard principles of contractual interpretation, the Court held that the parties objectively intended the franchise agreement to cover both locations as a single franchise arrangement. Reading the agreement as a whole and in light of the surrounding circumstances, the Court concluded that termination of the lease for one location brought the entire franchise agreement to an end. Consequently, the Court determined that the Franchisee breached the franchise agreement’s post termination requirements by continuing to operate after termination. However, because the Franchisee continued to pay full royalties and Vern’s Pizza suffered no actual loss, the Court declined to award damages. The Franchisee appealed, arguing that the Chambers Judge erred in law by misinterpreting the agreement and by misapplying the doctrines of contractual interpretation and the duty of honest contractual performance.
The Court of Appeal’s Decision
In dismissing the appeal, the Court affirmed the Chambers Judge’s conclusion that the termination clause was intended to operate as if the word “and” had appeared between the two restaurant locations. Echoing the Chambers Judge’s reasoning, the Court held that the territory description and operations provisions in the agreement contemplated the simultaneous operation of both locations, and that, at the time of contracting, both parties understood the franchise to comprise a dual‑location territory. In those circumstances, the parties would reasonably have expected the agreement to be dependent on the continued operation of both restaurants, and the interpretation adopted by the Chambers Judge did not give rise to any commercial absurdity.
Key Takeaways
The Court of Appeal’s decision underscores how even minor drafting errors can carry significant consequences in long‑term commercial agreements. A single unresolved placeholder and the absence of clear connective language in a termination clause led to years of litigation and ultimately determined the fate of an entire franchise relationship. The decision serves as a clear reminder that careful, precise drafting at the outset, particularly in standard form franchise agreements, is essential to avoid uncertainty, disputes, and costly litigation down the road.
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1 2025 SKCA 115.
2 2024 SKKB 147.