A recent Ontario Superior Court of Justice (Court) case, Data & Scientific Inc. v. Oracle
Corp. (Oracle), sheds some light on how the
courts may interpret and apply Bhasin in the context of an
attempt to terminate a contract with little or no notice. In brief
summary, Oracle Corp. was allowed to renew, on an annual basis,
relationships through its Oracle Partner Network conduits. The
agreement in question was clear that the annual renewal was at
"Oracle's sole discretion".
The plaintiff was a member of Oracle's Partner Network and
Oracle Corp. had renewed the annual agreement without interruption
or incident for about 20 years. The plaintiff requested another
renewal and received a response in 2014 that the agreement would
not be renewed. The plaintiff sued Oracle Corp. claiming damages,
including punitive damages, alleging that Oracle Corp. failed to
give reasonable notice of non-renewal. Despite the discretionary
language in the agreement, the plaintiff argued that Oracle Corp.
was somehow obliged to exercise its discretion reasonably and that
Oracle Corp., in effect, terminated a 20-year relationship without
purported notice, let alone reasonable notice.
Oracle Corp. moved to strike the claim for failing to disclose a
reasonable cause of action. Interestingly, counsel for Oracle Corp.
relied upon Bhasin at paragraph 72 of the SCC's
reasons for judgment, which states as follows:
"Classifying the decision not to renew the contract as a
contractual discretion would constitute a significant expansion of
the decided cases under that type of situation."
In essence, Oracle Corp. submitted that Bhasin
supported the general principle that the obligation to exercise
discretionary contractual powers reasonably does not apply in
contract renewal situations — ever. That submission was
The Court held that the comment in paragraph 72 must be
understood in context and that the SCC's concern and focus in
Bhasin was dishonesty, not unreasonableness.
The Court also noted that in Bhasin, the SCC recognized
that the list of situations and relationships that can attract good
faith obligations was not closed, could be invoked in widely
varying context and calls for a highly context–specific
understanding of what honesty and reasonableness require in any
In short, the Court held that it was not plain and obvious that
the plaintiff's claim, relying on Bhasin, would fail.
That result, particularly on a motion to strike, was not surprising
given the generally high bar to strike a claim.
What this case suggests is that, in the face of an allegation of
breach of good faith in the context of a renewal clause, it will be
difficult to strike a claim even where, as in Oracle, the
contractual agreement bestows a "sole discretion"
non-renewal power and requires no notice of any kind.
The Court concluded its decision by emphasizing that it was not
suggesting the plaintiff would necessarily prevail at trial nor
could even survive a summary judgment motion. No doubt
Bhasin will get further judicial treatment in the coming
year, particularly as it relates to the non-renewal of agreements
in the oil and gas industry.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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