Article 1375 of the C.C.Q. states that parties must
generally interact in good faith. Under Québec law, the duty
to act in good faith is implicit in every contract and is defined
as the absence of malicious intent in a prudent and diligent
contracting party. As such, the contracting party's behaviour
must be compatible with the achievement of the parties' common
goal. The parties must abide by this obligation as soon as pre
contractual negotiations begin, even if such an obligation is not
expressly provided for in the pre-contractual documents. A party
acting in bad faith can be found liable for any harm caused to the
other party by such behaviour.
The Québec Superior Court examined the duty to negotiate
in good faith in the recent decision of Desjardins
Sécurité financière v. Bergeron
(2011 QCCS 2204). In that case, the lessee had the option to renew
his lease according to the terms of the contract. The lessor
suggested a lease agreement under different conditions, including
an excessive rent increase. Despite repeated demands by the lessee,
the lessor never sent any documents justifying the rent increase
and failed to take the steps required to reach an agreement. The
lessee refused these renewal conditions and the lessor applied to
the courts for the eviction of the lessee as a result. The Court
found that the lessor acted in bad faith in neglecting to send
documents justifying the rent increase to the lessee. Because the
negotiations for the renewal of the lease were not carried out in
good faith, the lessee was permitted to continue to rent the
premises under the conditions of the first renewal agreement.
The contracting party will be considered to be in bad faith if
it makes no attempt to seriously negotiate or if it does not
address the legitimate demands of the other party. In
Garderie à moi mes enfants inc. v. Importations
de chaussures Vulcano ltée (2012 QCCS 1833),
the lease stated that Defendant had to sell its commercial building
to the plaintiff at market value. The lease included an exclusive
and irrevocable purchase option benefiting Plaintiff, who had, at
all times, consistently expressed its interest to purchase the
building at the end of the lease. The discussions relating to the
purchase price were abruptly interrupted by Defendant but Defendant
nevertheless confirmed its intention to proceed with the
However, rather than respecting the agreement and presenting
Plaintiff with the option to acquire the building, Defendant
presented Plaintiff with another offer to lease. This offer was not
accepted by Plaintiff, who wanted to purchase the building
outright. The Court held that Defendant failed to abide by its duty
to negotiate in good faith by not engaging in serious discussions
with Plaintiff and refusing to respect the lease clauses entitling
Plaintiff to acquire the building.
The duty to negotiate in good faith also carries with it the
duty not to break off negotiations without a valid reason. This
principle was endorsed by the Superior Court in
Friedman v. Ruby (2012 QCCS 1778). In
that case, the Court specified that a party who engages in
reasonable discussions and does not bring those discussions to a
standstill will not be considered to have acted in bad faith.
With the collaboration of Isabelle Gauthier- Brancoli.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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