Certainty of Terms - Agreements to Negotiate

Question 1

Bhasin v Hrynew 2014 SCC
(Dishonest Performance/General Duty of Good Faith/Only Relevant in Re-Negotiation Context)

Issues:
- Is there a common law duty on parties to perform their contractual obligations honestly?
- Was the renewal clause enforceable?

Answer 1

Rules:
-As an organizing principle of law, it is implied in every contract that obligations must be performed in good faith (this is imposed and has nothing to do with the intentions of the parties).
-Obligation of duty of good faith towards the parties is implied in law, not in fact of the case or objective reasonable person.
-When does this duty arise when implied by law? Duty of good faith in the performance of the promises in the contract, not a duty of good faith with each other before a contract.
-No obligation of duty of good faith in the formation of contracts, only once the contract has been made, including renewals requiring the formation of a new contract with re-negotiation/renewal clause/provision.
-What is the content of a duty of good faith? The absence of bad faith which would be dishonesty in performance of the obligations under contract. At its core is a duty of honest performance.
-There is a legal duty which applies to all contracts to act honestly in the performance of contractual obligations.
-At minimum, parties must not lie or knowledgably mislead each other about matters directly linked to the performance of the contract – can still pursue self-interest under freedom of contract.

Question 2

Empress Towers Ltd. v. Bank Of Nova Scotia
(Implied Obligation to Negotiate in Good Faith)

Issues:
- Is the renewal lease too vague to enforce?
- Was there an implicit obligation to negotiate in good faith?

Answer 2

• When there is an expressed agreement to agree, it carries with it an implied obligation and duty to negotiate in good faith
• Implied obligation to negotiate is established by the intent of the ORP in the shoes of the parties – obvious when parties draft an agreement to agree clause that the parties intended to negotiate otherwise what is the point?
• It is bad faith to withhold an agreement unreasonably or to give the contract to another party for the same or cheaper rate.
• A right to renew at market rate, that would be straight forwardly enforceable, but in this clause requiring mutual agreement by the parties and no agreement being reached by the parties permits termination, makes it so the court cannot imply a reasonable price based upon market rate. This is because the parties clearly here do not have a mutual understanding on the market rate, otherwise they would have agreed.
  
  • A reasonable price cannot be implied by the court, because the contract making it a contingent that the parties must agree upon the price, despite a market metric, and if they don’t, then parties can terminate the agreement.
  • This is what makes this case differ from (Foley v. Classique Coaches Ltd. [1934] 2 K.B 1 (C.A.)).

Question 3

Mannpar Enterprises Ltd. V. Canada
(Expressed Obligation To Negotiate In Good Faith/Limits Obligation to Negotiate in Good Faith)

Issues:
- Was there an implied term requiring Canada to negotiate for a renewal or negotiate in good faith for a renewal?
- Did crown have an obligation to negotiate in good faith?

Answer 3

Rules:
- Those with a fiduciary duty cannot negotiate in good faith because they legally have to put the interests of the party which they have a fiduciary relationship with above all else.
- In order to enforce an expressed renegotiation clause (or implied one from failed agreement to agree) there needs to be a market metric (or an objective standard) to measure the duty against (otherwise there is not way to know whether the parties are acting in good faith).
1) You need a serious intent for the obligation to negotiate to be enforceable. This creates an implied obligation to at least try to negotiate (Empress Towers Ltd. v. Bank Of Nova) Scotia intent to negotiate in good faith.
-There is no mutual intent to negotiate here in good faith based upon a reasonable person, because Canada has a separate fiduciary duty to the Indian Band.
-Canada is not free to solely negotiate with Mannpar, they must do so with the Indian Band in mind and cannot possibly intend to have an obligation to negotiate in good faith when having a 3rd party in mind.