Contract Law Winter Readings and Case Briefs PDF

Chapter 8.1-8.4 – Representation and Terms; Classifications and Consequences (can Skip Leaf v Int’l Galleries) Statements made during negotiations leading up to a contract may or may not become terms of the contract Fall into three broad categories 1...

Chapter 8.1-8.4 – Representation and Terms; Classifications and Consequences (can Skip Leaf v Int’l Galleries) Statements made during negotiations leading up to a contract may or may not become terms of the contract Fall into three broad categories 1. statements made without contractual intent a. i.e. Carbolic Smoke Ball) b. ‘Mere Puffs’ or more modernly characterized as expressions as “sales talk” and no liability attach to them 2. Pre-contractual statements categized as mere representations a. Not terms of the contract but which can lead to the limited legal consequences indicated in section 2 of the chapter 3. Statement may be construed as a terms of the contract a. Can lead to more serious legal liabilities in the event that it is broken Due to the different remedies available, the distinction between mere representation and terms is vital Misrepresentation and recission Three basic issues relating to the availability of the remedy of recission for misrepresentation o What kinds of pre-contractual statemnts will, if false, be characterized as misrepresentations giving rise to revision o What is the nature of the remedy of recission o What limitations are imposed on ones ability to rescind for misrepresentation Important draw clear distinctions between the remedy of recission and the remedies available where only party has failed to do all that they are promised by breaking a term of the contract “rescission” is an expression which is used in a variety of ways (at least 3 can be clearly identified) o It is commonly used to denote the setting aside of a contract because of some defect affecting its formation such as misrepresentation, duress or undue influence o It is also used to describe the discharge of an existing contract by subsequent agreement of the parties o It is incorrectly, but commonly, used to refer to the situation where an innocent party is discharged from having to carry out their obligations under  the contract due to the other party’s serious breach of contract or failure to perform ▪ Contract is not “wiped out” but the innocent party is entitled to be compensated by virtue of its previous existence to the extent necessary to put them in the position they would have been in had the contract been performed Different between a claim for damages and a suit to rescind an agreement o The action for damages is an action to enforce the agreement, meaning its object the substitution of money damages for performance which should have been rendered under the binding agreement between parties ▪ Innocent party may also wish to be free from the obligation to perform o The effect of a suit for rescission is to determine that the contract is one that ought not to be enforced, meaning any monetary award (or other order) made upon recission should have as its objective the restoration of the parties to their pre-contract positions Guarantee Co of NA v Gordon Capital Corp o Paras 39-45 discuss confusion over the meaning and show preference for it to be used to mean the contract is voided from the beginning Redgrave v Hurd (1881), 20 Ch.D 1 (C.A.) Type Misrepresentation (innocent misrepresentation) FACTS Advertised to sell business premises and share in his business Represented it brough in between 300 and 400 pounds per year when it truly grossed less than 200 pounds a year Defendant purchased the property and partnership in the law practice on the premises on the basis of this representation o When it was discovered the law practice was “utterly worthless” he refused to complete his payment Plaintiff sued for specific performance Redgrave successful at trial and Hurd appealed Plaintiff solicitor looking for a partner; defendant inquires and is show receipts demonstrating between £200-400/year in business Later finds out that the business is worthless; refused to complete the contract, says that plaintiff misrepresented the state of the business ISSUE Does the representor need to have known that the statement was untrue for there RULES/RATIO To demonstrate an innocent representation, must demonstrate: 1. Untrue statement or past or present fact  2. That was material 3. Induced the represented to enter the contract Representee does NOT need to demonstrate that the representor knew that the statement was false at all times it was made due to the claim here concerns innocent misstatements A representee does not lose the right to rescind by virtue of their own negligence in ascertaining the truthfulness of the misstatement Party claiming misrepresentation does not have to prove their reliance on the material misrepresentation, because it is an inference of law that they so relied on unless it can be clearly demonstrated that they did not ANALYSIS Plaintiff argued the defendant cannot rescind the contract as he simply should have used due diligence and sought more info before purchasing the land o Judges rejected this and said that the only limitation on suing for misrepresentation is the limitation period which starts when the fraud reasonable should have been discovered Justice Jessel stated that if it is shown that a representation was made to induce a party to enter a contract and contract was formed then there is a presumption that the representation was relied upon Judge finds misrepresentation to have been innocent and therefore the contract can be rescinded but damages not awarded JUDGEMENT Appeal allowed; contract rescinded Class Other courts have defined this as a question of fact, as in L.K Oil notes/quotes & Gas v Canlands Energy Corp, Alberta CA, 1989 rather than a legal presumption o Under this approach there is no presumption regarding reliance, rather we look to the facts to determine whether or not there's be reliance o Idea then is that if there’s no facts either way, we will assume that there was reliance Smith v Land and Horse Property Corp. (1884), 28 Ch. D 7 (C.A) Type Misrepresentation FACTS ISSUE At what point does a statement of opinion turn into a statement of fact and thus become a misrepresentation RULES/RATIO When facts are equally known to both sides, then statements are generally opinions, however when facts are NOT equally known, then a statement of opinion by one who knows facts best is often a statement of material fact as they imply that the opinion as justification ANALYSIS JUDGEMENT Class notes/quotes Bank of BC v Wren Developments Ltd Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Kupchak v Dayson Holdings Ltd Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Heilbut, Symons & Co v Buckleton Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Ontario Law Commission, Report on Amendment of the Law of Contract Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Consumer Protection Act Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Chapter 8.6 - Parol Evidence Zell v American Seating Co., 139 F.2nd 641 Class “In sum, a rule so leaky cannot fairly be described as a stout notes/quotes container of legal certainty. John Chipman Gray, a seasoned practical lawyer, expressed grave doubts concerning the reliance  of businessmen on legal precedents generally. If they rely on the parol evidence rule in particular, they will often be duped. It has been seriously questioned whether in fact they do so to any considerable extent. We see no good reason why we should strain to interpret the record facts here to bring them within such a rule.” Hawrish v BMO 1969 SCC Type FACTS ISSUE Is the oral term at issue here inconsistent with or contradict the written terms? o If so, in what way? Does the rule change if we approach the issue as one of oral warranty or as collateral contract RULES/RATIO Parol evidence of an oral term, or of a collateral contract, is not admissible where it is inconsistent with or contradicts the written agreement ANALYSIS JUDGEMENT Class The defence was that when he signed the guarantee, Hawrish notes/quotes had an oral assurance from the assistant manager of the branch that the guarantee was to cover only existing indebtedness and that he would be released from his guarantee when the bank obtained a joint guarantee from the directors of the company. The bank did obtain a joint guarantee from the directors on July 22, 1959, for the sum of $10,000. Another joint guarantee for the same amount was signed by the directors on March 22, 1960. Between the dates of these two last-mentioned guarantees there had been some changes in the directorate.” (d) The guarantor acknowledges that no representations have been made to him on behalf of the bank; that the liability of the guarantor is embraced in the guarantee; and that the guarators intends the guarantee to be binding whether any other guarantees to security is given to the bank or not. “This guarantee was to be immediately effective. According to the oral evidence it was to terminate as to all liability, present or future, when the new guarantees were obtained from the directors. But the document itself states that it was to be a continuing guarantee for all present and future liabilities and  could only be terminated by notice in writing, and then only as to future liabilities incurred by the customer after the giving of the notice. The oral evidence is also in plain contradiction of the terms of para. (d) of my summary above made.” As distinct term or collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement o Can be valid and enforceable even thought the main agreement is in writing o But only if the two may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement Questions Based on the comments in this case, when might it be possible to use a collateral contract argument Can parol evidence regarding the existence of an oral term that varies or contradicts be admitted? Can evidence of a collateral contract be introduced if it varies or contradicts with the main agreement? Using everyday commonsense, what should Hawrish, a lawyer, have done when speaking to the bank manager to ensure the oral terms were admissible? Bauer v BMO 1980 SCC Type Parol evidence FACTS Written document states that bank does NOT need o register its debt to perfect its security Bank does not register its security Debtor states that he was promised by the bank manager that business debts would be reassigned to him if he made good on his payments ISSUE RULES/RATIO ANALYSIS JUDGEMENT “I can see no distinction between the case at bar and that of Hawrish v BMO Class Notice some presence of misrepresentation notes/quotes o Both types can sometimes arise “The only evidence I can find in the record of such an arrangement is a statement by the bank manager that the bank would have reassigned the accounts on payment by the  guarantor as normal practice, and the assertion by the guarantor that he had been told by the bank manager that if he made good on his guarantee the accounts would be reassigned to him. He said as well that he would not have given his guarantee otherwise... ” “... it seems clear to me that this evidence would go towards imposing a limit on the bank’s rights with respect to the security given by the debtor. This would clearly contradict the terms of the guarantee which, as has been pointed out, gave the bank the right to abstain from registration and perfection of security. On this basis, it would be inadmissible under the parole evidence rule and any collateral agreement founded upon it could not stand” J Evans & Son (Portsmouth) Ltd v Merzario (Andrea) Ltd Type Parol evidence Rule FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Denning “The question is whether the company can rely on those exemptions. I do not think so. The cases are numerous in which oral promises have been held binding in spite of written exempting conditions.” Roskill “... [The] doctrine, as it seems to me, has little or no application where one is not concerned with a contract in writing...but with a contract which, as I think, was partly oral, partly in writing and partly by conduct. The court is entitled to look at and should look at all the evidence from start to finish in order to see what the bargain was that was struck between the parties” Class notes/quotes Questions What factual and/or legal distinctions were at play in this case proposed compared to Hawrish and Bauer? (if any) How did Denning and Roskill each justify their respective conclusions  Where have we seen this sort of approach before – treating the entire chain of communications as a ‘single contract’? Has Canadian law every really adopted this approach Gallen v Allstate Grain 1984, BCCA Type FACTS Oral statements were made that the buckwheat would not destroy corps, but it did “Allstate gives no warranty as to the productiveness or any other matter pertaining to the seed sold to the produced and will not in any way be responsible for the crop.” ISSUE RULES/RATIO ANALYSIS Justice Lambert refers to the “one contract” and “two contract” theories o Does Lambert think there is a difference whether the argument is one of oral warranty or collateral contract? JUDGEMENT Lord Wedderburn o “What the parol evidence rule has bequeathed to the modern law is a presumption – namely that a document which looks like a contract is to be treated as a whole contract.” o This presumption is very strong but is a presumption only and it is open to either party to allege that there was another express stipulation intended to continue in addition to the written contract BCAA says Hawrish and Bauer demonstrate that the rule is not absolute...based on reasoning o Example - “...If the written contract is induced by an oral misrepresentation that is inconsistent with the written contract, the written contract cannot stand.” Court concludes o “...the oral warranty and the printed document do not contradict each other. Taking cl. 23 without regard to the oral warranty, and having regard to the fact that the clause does not exclude all warranties, I think that the proper interpretation of cl. 23, in its context, is that all warranties pertaining to the seed are excluded... o But even if I am wrong and cl.23, if it stood alone, would bear the meaning that Allstate was not to be liable for  anything that prevented the production and harvesting of a buckwheat crop grown from the seed, I think it is proper to interpret cl.23 in its relationship with the oral representation that was made in this case... Court rules that the representation was a warranty (we know that warranties form part of the contract, they are not pre- contractual) o The exclusion clause must be read harmoniously with this warranty o As a matter of the principles of contract interpretation, there is a presumption that contract provisions should not be interpreted as contradicting one another and the general must be read in light of the specific Justice Anderson o It is a matter of construction (contract interpretation) whether the written terms were intended to exclude the express warranty Justice Seaton in dissent o Hawrish applies – parol evidence cannot be admitted where it contradicts or is inconsistent with the written contract which it is here Class Justic Lampert (BCCA) notes/quotes o The parol evidence rule is not absolute but is rather a strong presumption in facour of the written terms ofa contract o Thinks that the parol evidence rule ought to be treated as a rebuttal presumption o Tries to reframe the Hawrish line of cases to support a view of the per as strong rebuttal presumption rather than an absolute rule (does not lead a direct attack on Hawrish or say that the law should change) o Provides antoher way of reading the existing precendents to conform with his preferred interpretation of the parol evidence rule (he says “this is what those cases really stand for”) 1. When should the presumption be weakest and why? 2. When should the presumption be strongest and why? 3. Is the presumption stronger or weaker if the contract is a standard form contract? 4. Is the presumption stronger or weaker when there is a specific oral representation and general exemption  Presumption will be o At its strongest when the parol evidence demonstrates an oral term or related collateral contract that contradicts the terms of the written contract o Middling strength where the oral terms subtract from or vary the written terms o Weaker where the oral term simply adds to the written terms As far as "adding to" is concerned, there is nothing inherently unreasonable about two agreements which add to each other. "Subtracting from" and "varying" represent a halfway stage between "adding to", on the one hand, which is wholly reasonable, and "contradicting", on the other hand, which is wholly unreasonable” “... the presumption would be more rigorous in a case where the parties had produced an individually negotiated document than it would be where a printed form was used, though it would be a strong presumption in both cases.” “the presumption would be less strong where the contradiction was between a specific oral representation, on the one hand, and a general exemption or exclusion clause that excludes liability for any oral representation, whatsoever, on the other hand, than it would be in a case where the specific oral representation was contradictory to an equally specific clause in the document.” o Name Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Chapter 8.7,8.9 - Classification of Terms and Related Remedies  Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd Type FACTS ISSUE Question whether an event which is the result of the other party’s breach of contract has this consequence cannot be answered by treating all contractual undertakings as falling into one of two separate categories o “conditions” the breach of which gives rise to an event which relieves the party not in default of further performance of his obligations and “warranties” the breach of which does not give rise an event RULES/RATIO Clause 1: “She being in every way fitted for ordinary cargo service” Clause 3: “to maintain the vessel in a thoroughly efficient state in hull and machinery” Clause 13: ‘due diligence clause’ exempts the shop-owners from responsibility for delay or loss or damage to goods on board due to unseaworthiness unless such delay or loss or damage has been caused by want to due diligence of the owners in making the vessel seaworthy and fitted for the voyage Test for classifying terms upon breach o Does the occurrence of the breaching event deprive the party who has further obligations still to perform of substantially the whole benefit of that which it was the intention of the parties that it should receive? o If so, and the event occurs from the default of one party, this gives the innocent party the choice to stop performance and repudiate the contract Three types of 1. A ‘true condition’ contract a. A term is a true condition if it is so defined in the contract terms or by statute b. Or by its nature because every conceivable breach of the term gives rise to an event that ‘will deprive the party not in default of substantially the whole benefit’ which it was intended that they should obtain from the contract 2. A ‘true warranty’ a. Which is a term that if breached will never deprive the innocent party of substantially the while of the benefit they were to received form the contract 3. Innominate or intermediary term a. Cannot be priori classified there are the ‘hard cases’  b. For such terms we look at the events by the breach and examine whether the particular event has, on the facts, acted to deprive the party not at fault of substantially the while benefit which it was intended that should be received from the contract ANALYSIS “There are, however, many contractual undertakings of a more complex character which cannot be categorised as being "conditions" or "warranties" …Of such undertakings all that can be predicated is that some breaches will and others will not give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend upon the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertaking as a "condition" or a "warranty.” JUDGEMENT Class Adopted in Canada – example Herron v Chase Management, notes/quotes 2003 ABCA 219 In HK Fir, English court of appeal take opportunity to expand the categories because it says, there are many types of terms where the result of the breach cannot be determined a priori – it will depend on the circumstances Under old system, lawyers and courts tortured themselves to fit within these two rigid categories, but should instead adopt a third type of term “…the shipowner's undertaking to tender a seaworthy ship has, as a result of numerous decisions as to what can amount to "unseaworthiness", become one of the most complex of contractual undertakings. It embraces obligations with respect to every part of the hull and machinery, stores and equipment and the crew itself. It can be broken by the presence of trivial defects easily and rapidly remediable as well as by defects which must inevitably result in a total loss of the vessel. Consequently the problem in this case is, in my view, neither solved nor solvable by debating whether the shipowner's express or implied undertaking to tender a seaworthy ship is a "condition" or a "warranty” “What the learned judge had to do in the present case as in any other case where one party to a contract relies upon a breach by the other party as giving him a right to elect to rescind the  contract, was to look at the events which had occurred as a result of the breach at the time at which the charterers purported to rescind the charter-party and to decide whether the occurrence of those events deprived the charterers of substantially the whole benefit which it was the intention of the parties as expressed in the charter-party that the charterers should obtain from the further performance of their own contractual undertakings.” Confusion alert o At some point at the end of the decision Lord Diplock refers to when the characters proposed to ‘rescind’ and whether the owners accepted the ‘recission’ o This terminology is NOT CORRECT, a repudiatory breach is NOT the same thing as the remedy of recission Wickman Machine Tool Sales Ltd v L Schuler AG Type FACTS ISSUE How do we reconcile Clause 7(b) and Clause 11 How did each of these clauses affect each clause’s interpretation What does this mean in relation to whether a repudiatory breach has taken place? RULES/RATIO ANALYSIS JUDGEMENT “Schuler maintains that the use of the word "condition" is in itself enough to establish this intention. No doubt some words used by lawyers do have a rigid inflexible meaning. But we must  remember that we are seeking to discover intention as disclosed by the contract as a whole. Use of the word " condition " is an indication—even a strong indication—of such an intention but it is by no means conclusive.” “But if clause 7 must be read with clause 11 the difficulty disappears. The word "condition" would make any breach of clause 7(b), however excusable, a material breach. That would then entitle Schuler to give notice under clause 11(a)(i) requiring the breach to be remedied…. In my view, that is a possible and reasonable construction of the contract and I would therefore adopt it.” Class notes/quotes Fairbanks Soap Co v Sheppard Type FACTS Evidence was clear that machine was not ‘substantially completed’ There was no claim for quantum meruit IF quantum mereuit had been claimed, was the fact that the appellant-maintained possession of the unfinished machine sufficient evidence that the party intended to make take the benefit? ISSUE RULES/RATIO ANALYSIS Court cites Sumpter o “The appellant has never elected to take any benefit... Mr. Wilson state that he was willing... [to permit] the respondent to remove the machine within a reasonable amount of time.” JUDGEMENT Class Mere possession of the work, alone, especially where the notes/quotes possessing party cannot help but maintain possession is not, in and of itself, evidence that the party intended to take the benefit of the work Sumpter o “There are cases in which, though the plaintiff has abandoned the performance of a contract, it is possible for him to raise the inference of a new contract to pay for  the work done on a quantum meruit from the defendant's having taken the benefit of that work, but, so that may be done, the circumstances must be such as to give an option to the defendant to take or not to take the benefit of the work done. It is only where the circumstances are such as to give that option that there is any evidence on which to ground the inference of a new contract. Where, as in the case of work done on land, the circumstances are such as to give the defendant no option whether he will take the benefit of the work or not, then one must look to other facts than the mere taking the benefit of the work to ground the inference of a new contract. In this case I see no other facts on which such an inference can be founded.” o Sumpter v Hedges Type FACTS ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class notes/quotes Howe v Smith Type FACTS Contract says “a deposit and in party payment of the purchase money” ISSUE RULES/RATIO ANALYSIS JUDGEMENT Class “The terms most naturally to be implied appear to me in the case notes/quotes of money paid on the signing of a contract to be that in the event of the contract being performed it shall be brought into account  but if the contract is not performed by the payer it shall remain the property of the payee…. an earnest to bind the bargain so entered into and creates by fear of its forfeiture a motive in the payer to perform the rest of the contract.” Chapter 8.8, CM Callow Inc v Zollinger, Matthews v Ocean Nutrition Canada Ltd, Quebec v Pekuakamiulnuatsh Takuhikan paras 20-46&107-139 Bhasin v Hrynew Type Performance obligations FACTS B – dealer of Canadian American Financial Corp selling educational savings plans o Built successful business H taking over other dealers’ businesses throughout the rea with Canam's encouragement B continually resisted both CanAm and H attempts to have his business taken over C had H positioned as an auditor whereby he would have access to B’s confidential business info C was positioning H to take over B’s business with B to become H’s employee o Info not disclosed to B o B asked but C refused to provide straight answer B refused to allow H this info and C exercised its right to not renew his contract C deceptively and deceitfully worked to undermine entire purpose of B’s contract with them o Misled him and were dishonest when forthrightly confronted by B ISSUE SCC suggests that is time to take 2 step incremental steps to make the common law less unsettled o Good faith principle o Doctrine of honest performance RULES/RATIO It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith  o A duty of honest performance which requires the parties to be honest which each other in relation to the performance of their contractual obligation ANALYSIS Two step to make common law less unsettled 1. General organizing principle a. Is not a standalone doctrine of contract law b. Principle is not doctrine but instead an arrow pointing in a direction (saying this should point towards good faith) c. “There is an organizing principle of good faith that paties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily. An organizing pricniolpe states in genral terms a requirement of justice form which more specific legal doctrune say be derived.” 2. Principle manifests itself that of honest performance a. It is appreciated to also recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principles of good faith, which is a duty of honest performance b. Requires that the parties not lie or knowingly mislead each other in the performance of their contractual obligations JUDGEMENT “... it will enhance rather than detract from commercial certainty” Cited Professor McManus to agree with him o People pursue self-interest when they know there is certainty o Enhances everything that has been discussed and makes everything possible o What do people intend, what are expectations Honest performance is what bolsters people's reasonable expectations as they believe people will perform honestly As this is a substantive doctrine of contract law, the parties may not contract out of it, although they can stipulate the way it should be performed so long as they provide for a minimally acceptable level of conduct Nobody has infinite discretion is any legal context Class SCC looking for a remedy to active dishonesty that undermines notes/quotes contractual relationship Case was a huge deal to contract law when it was decided, “ground-breaking”  The notion of good faith has deep roots in contract law and permeates many of its rules Anglo-Canadian common law has until recently resisted acknowledging any generalized and independent of good faith performance SCC realized it was time to bring coherence to this area of law Organizaing principles is NOT the same as a fiduciary duty o Fiduciary relationship is a relationship of utmost trust and confidence o Requires that fiduciaries acts honestly, in good faith, and strictly in the best interests of the beneficiaries of such relationships o Fiduciaries must put the interests of the other party before their own Organizaing principle does not stop commercial parties from pursuing their own legitimate economic interest o Development of food daith must be clear not to veer into a form of ad hoc judicial moralism CM Callow Inc v Zollinger Type Performance obligations FACTS “At issue in this appeal is the winter maintenance agreement, which had a new two-winter term from November 1, 2012, to April 30, 2014. Pursuant to clause 9, the corporations were entitled to terminate the winter maintenance agreement if Callow failed to give satisfactory service in accordance with the terms of this that “if for any other reason [Callow’s] services are no longer required for the whole or part of the property covred by this agreement, then the [condo corp.] may terminate this contract upon giving ten (10) days’ notice in writing to [Callow]”” Evidence indicates that Callow was doing a good job o However, in March/April of 2023 the Board decided that they were not going to renew his contract and began shopping around for quotes from other contractors o Did not inform him of the decision “Callow began discussions throughout the spring and summer of 2013 with Baycrest regarding a renewal of the winter maintenance agreement. Specifically, Mr. Callow had various exchanges with two condominium corporations’ board  members, one of whom was Mr. Peixoto. Following these conversations, wrote the trial judge, “Mr. Callow thought that he was likely to get a two-year renewal of his winter maitenace services contract and they were satisfied with his services” Callow continued to do ‘freebie’ work o Did this because he wanted to impress the Board o Wanted to show how good he could do to secure another contract all while they were shopping around and letting him do this free work Conversations between Callow and Mr. Peixoto continued into July 2013, at which time Callow decided to improve the appearance of two gardens. In an email dated July 17, 2013, Mr. Peixoto wrote to another condominium corporation board member regarding this “freebie” work, writing in part: “It’s nice he’s doing it but I am sure it’s an attempt at us keeping him. Btw, I was talking to him last week as well and he is under the impression we’re keeping him for winter again. I didn’t say a word to him cuz I don’t wanna get involved but I did tell [Ms. Zollinger] that [Mr. Callow] thinks we’re keeping him for winter” “Baycrest did no inform Callow about the decision to temrinte the winter maintenance agreement until September 12, 2024. At that point, Mr. Zollinger adivsed Callow by way of email “that Baycrest will not be requiring your services for the winter contract for the 2013/2014 season, as per section 9 of the contract, Baycrest needs to provide the cotnractor with 10 days' notice” (AR, vol III, at p 49)” ISSUE Were the rights of the contract carried out in honest fashion RULES/RATIO Court states that his case can be decided as a matter of honest performance (Bhasin) Court adds on and outlines duty to exercise discretionary powers in good faith No contractual right, including a termination right, can be exercised dishonestly and contrary to requirements of good faith Duty of honest performance is a contract doctrine – it attracts damages Misleading can include lies, half-truths, omissions, and even silence (fact-drive), however this is not a closed list and just shows that dishonesty/misleading is not confided to direct lies ANALYSIS JUDGEMENT Expressly acknowledged that exercising a termination clause is not in itself, evidence of a breach of good faith  o Believed the Baycrest deliberately deceived Callow about termination which was a breach of duty of honest performance Majority o States that this case can be decided entirely as a matter of duty of honest performance (step 2) o Have appropriate regard to the legitimate contractual interests of their counterparty (Bhasin at para 63-64) o Need not, subvert its own interests to those of Callow by acting as a fiduciary or in a selfless manner that would confer a benefit on Callow o Must exercise discretionary rights honestly furth of general principle fo acting in good faith Dissent o Absent a duty to disclose, it is far from obvious when exactly silence will knowingly mislead (unless there is a positive obligation to speak) o Conduct that is covered by duty of honest performance is not clear Class Unlike estopple or fraud misrepresentation, duty of honest notes/quotes performance does not require a defendant to intend that the plaintiff rely on their false statement Not a duty to disclose information but where the failure to speak means dishonesty, a wrong has occurred o “Failure to speak out amounts to active dishonesty” o If you are asked a question and it leads to not answering and causing something than it can constitute active dishonesty Liability flows from active dishonesty and not a unilateral duty to disclose Matthews v Ocean Nutrition Ltd Type Performance Obligations FACTS ISSUE Applicability of honest performance RULES/RATIO Is applicable to employment contracts Puts off addressing failure to provide reasonable notice though ANALYSIS JUDGEMENT “it suffices to say that a contractual breach of good faith rests on a wholly distinct basis from that relating to the failure to provide reasonable notice” “...a duty of good faith will one day bind the employer based on a mutual obligation of loyalty in a non-fiduciary sense during the life of the employment contract, owed reciprocally by both the employer and employee” Class To what extent this may apply during the life of the actual notes/quotes employment contract left open with this case Quebec v Pekuakamiulnuatsh Takuhikan Type FACTS Tripartite agreements entered into by the Government of Canada, Government of Quebec and Pekhuaminulnuatsch Takuinkan indigenous band council Purpose to establish an Indigenous police force funded by Federal/Quebec Agreements allow for a regular renewal mechanism Contract began in 1996 and renewed annually Consistent substantial funding deficit “From 2013-2017, [the Council] had to assume deficits totaling $1,599,469.95.” Termination clause permits the contract to be terminated at any time by any party for any reason Case entirely under civil code o Did not cite any of the common law cases o Unaware to what extent its relevant to common law good faith ISSUE RULES/RATIO ANALYSIS JUDGEMENT Cote (dissent) Class Terminatin clause notes/quotes o “By referring to the making of new agreements, this clause tends to show that each individual agreement fits into a long‑term relationship punctuated by a series of successive agreements entered into to ensure the maintenance of the police force beyond the term of each agreement. Moreover, since a notice of extension does not have the effect of extending the funding provisions, the decision to prolong an annual agreement implies that the parties must renegotiate the funding provisions when a “new agreement” is entered into. Clause 6.10.2 therefore creates an obligation to negotiate the funding terms, but only if the parties decide to continue their contractual relationship, since they are free to end it at any time.” o o