In this case, the Judge described the action as a claim
"for damages for breach of contract and bad faith." The
Judge went on to say that "in order to be successful, the
plaintiff must prove on the balance of probabilities that the
defendant was acting in bad faith in deceiving the plaintiff of its
The law is very clear: there is no independent duty of good
faith upon which one can sue for breach. Parties are obliged to act
in good faith towards each other in the implementation of a
contract but one cannot sue for damages for bad faith. There is a
distinction, and this case is very close to the line.
The plaintiff worked part-time at a dry cleaning business owned
and operated by the defendant. The plaintiff offered to buy the dry
cleaning business from the defendant and the parties agreed to a
purchase price of $250,000. Since the defendant owned the premises
in which the business was located, they also agreed on a lease for
the use of the premises for five years at $4,000 per month in rent.
The lease included a right of first refusal for the plaintiff to
lease the premises again after the end of the five-year term,
exercisable if the defendant decides at that time to continue to
lease the premises out. It was expressed this way because the
defendant wanted the freedom to take the premises back after the
five-year term to operate it himself.
At the end of the five-year term, the parties discussed a
renewal. While the evidence of the parties differed with respect to
their discussions, it appears that at the very least the defendant
indicated that if the plaintiff wanted to lease the premises for a
further term, the rent would be $4,500 per month. The plaintiff
indicated that she could not afford to pay that much and asked the
defendant whether or not he would be interested in buying the
business back. The defendant expressed such an interest and offered
the plaintiff $35,000 on a take it or leave it basis. She took
Several days later, another individual passed by the store and
bumped into the defendant. This person knew the defendant because
her employer had been a tenant at the premises several years
before. The defendant asked this individual if she wanted to buy
the dry cleaning business. She expressed interest and ultimately
they agreed on a sale of the business for $225,000. A lease with
the purchaser was entered into for a five-year term at $4,500 per
month to start, increasing to almost $5,500 in the final year of
The plaintiff then sued, insisting that the defendant had
deceived her into giving up her right of first refusal. The
plaintiff advanced the theory that the defendant had the new buyer
(and new tenant) in mind all along and persuaded the plaintiff to
walk away from the business and the lease for very little
compensation so that the business could be flipped at a significant
The trial Judge found in favour of the defendant. The Judge was
satisfied that there was no evidence that the defendant had
intended anything other than to take the premises back and operate
the business himself until, by coincidence, he bumped into a person
who turned out to be a new purchaser and new tenant. There was no
evidence of premeditation.
The problem I have is the trial Judge's suggestion that the
defendant would have been liable for damages if the plaintiff had
been able to prove that the defendant had "breached the duty
of good faith it owed to the plaintiff as its bargaining partner
and deceived [the plaintiff] into signing away her rights under the
lease." In my view, even if the defendant had deprived the
plaintiff of her right of first refusal by misleading her about his
intentions, the fact is that the new lease entered into with the
new purchaser provided for rental amounts which the plaintiff had
clearly indicated that she simply could not afford. In other words,
even had the plaintiff been told that the defendant had an
opportunity to lease the space to someone else at $4,500 per month
to start, increasing annually thereafter, the plaintiff would never
have been able to match that offer. For that reason alone, in my
view, there is some considerable doubt whether or not the plaintiff
was deprived of her rights. In those circumstances, there is no
question that the plaintiff would have been mistreated. However,
shabby treatment does not amount to a cause of action in and of
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