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SALE OF GOODS - Future goods

Tuesday, October 01, 2019 @ 8:37 AM  

Lexis Advance® Quicklaw®
Appeal by the plaintiff from the trial judgment that set aside a series of forward streaming contracts and security instruments between the parties. The parties entered several agreements pursuant to which the appellant was to purchase canola from the respondent, an experienced farmer and businessman, on an annual basis. The appellant paid $4.5 million up front, in advance of delivery. The respondent had provided a positive net worth statement prior to entering the agreements. He subsequently defaulted by failing to deliver the canola. The trial judge found the contracts and security instruments were unconscionable. He found the respondent’s financial distress and the appellant’s relative strength created a substantial inequality in bargaining power.

HELD: Appeal allowed. The trial judge erred in principle by failing to consider evidence that was relevant and material to the question of whether an inequality of bargaining power existed between the parties. The trial judge misunderstood the degree of inequality in bargaining power required under the principle of unconscionability. The evidence did not establish that the degree of financial inequality between the parties had materially undermined the respondent’s ability to protect his own interests. The trial judge erred in finding the agreements were one-sided, onerous and unconscionable. At its core, the interpretation of the security instruments by the trial judge was tantamount to a conclusion that the agreements were unconscionable only by reason of the steps the appellant took to protect itself against breach by the respondent. The matter was remitted to the Court of Queen’s Bench for a determination of damages and for enforcement of the security interests in question.

Input Capital Corp. v. Gustafson, [2019] S.J. No. 304, Saskatchewan Court of Appeal, R.G. Richards C.J.S., N.W. Caldwell and R. Leurer JJ.A., August 16, 2019. TLD-September302019005