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TERMS - Express terms - Renewal - Implied terms

Friday, December 14, 2018 @ 8:28 AM  

Lexis Advance® Quicklaw®
Appeal by the defendant condominium corporations from a breach of contract judgment and award in favour of the plaintiff. The plaintiff provided summer and winter maintenance services to ten condominium corporations pursuant to two separate contracts. The contracts were negotiated via a Joint Use Committee on behalf of a Condominium Management Group and designated property manager. The winter contract contained a provision for early termination by the defendants upon ten days' notice. In April 2013, the defendants decided to terminate the winter contract, but did not provide the plaintiff with notice until September. The delay was due to the defendants' concern that notice of termination would jeopardize the plaintiff's work under the summer contract, which involved free services in the hope his contracts would be renewed. The trial judge concluded that the defendants breached their contractual duty of honest performance by acting in bad faith through withholding the fact that they intended to terminate the winter contract to ensure that the plaintiff performed the summer contract, and by continuing to represent that the winter contract was not in danger of non-renewal. The trial judge awarded damages based on the profit the plaintiff would have made from performing the remaining period of the winter contract, with related expenses. The defendants appealed.

HELD: Appeal allowed. The trial judge erred by improperly expanding the duty of honest performance in a manner that went beyond the terms of the winter contract. Although the facts suggested the defendants failed to act honourably, they did not rise to the high level required to establish a breach of the duty of honest performance. There was no unilateral duty to disclose information relevant to termination. The defendants were free to terminate the winter contract provided only that they informed the plaintiff of their intention to do so and gave the required notice. The duty of honest performance concerned matters directly linked to performance. It did not limit the defendants' freedom concerning future contracts not yet negotiated or entered into. The communications between the parties that may have led the plaintiff to believe that there would be a new contract did not preclude the defendants from exercising their right to terminate that contract.

C.M. Callow Inc. v. Zollinger, [2018] O.J. No. 5855, Ontario Court of Appeal, P.D. Lauwers, G. Huscroft and G.T. Trotter JJ.A., November 9, 2018. Digest No. TLD-December102018010