The Supreme Court of Canada granted leave to appeal in August
2013 in one case that is likely to be of significant interest to
Canadian franchisors and franchisees. The decision, Bhasin v.
Hrynew 2013 ABCA 98, from the Alberta Court of Appeal held that the
corporate defendant did not have to act in good faith in exercising
a right to give notice to end a contract. The contract provided for
an initial term of three years and which would be automatically
renewed for successive three year periods, unless either party
notified the other at least six months prior to the end of the
current term that they wanted to end the agreement. The provision
3.3 The term of this Agreement shall be for a period of three
years from the date hereof (the "Initial Term") and
thereafter shall be automatically renewed for successive three year
periods (a "Renewal Term"), subject to earlier
termination as provided for in section 8 hereof, unless either CAFC
or the Enrollment Director notifies the other in writing at least
six months prior to expiry of the Initial Term or any Renewal Term
that the notifying party desires expiry of the Agreement, in which
event the Agreement shall expire at the end of such Initial Term or
Renewal Term, as applicable.
The Court refused to imply a term in the agreement that a party
seeking to terminate it must have good reason for doing so. As the
Court wrote: "The parties did not intend or presume a
perpetual contract, as they contracted that either party could
unilaterally cause it to expire on any third anniversary."
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