Canada: The Supreme Court Puts An End To The Judicial Saga Begun By Churchill Falls (Labrador) Corporation Limited

On November 2 the Supreme Court of Canada rendered a highly anticipated decision in the judicial saga involving Churchill Falls (Labrador) Corporation Limited ("CFLCo") and Hydro-Québec1. The Court dismissed CFLCo's appeal virtually unanimously for a lack of any legal basis, and in doing so refused to countenance any application of the theory of unforeseeability in Quebec law or any broadening of the concepts of good faith and equity in order to impose on one of the contracting parties an obligation to renegotiate the contract.


On May 12, 1969 CFLCo and the respondent Hydro-Québec entered into an energy supply contract with a term of 65 years whereunder Hydro-Québec agreed to purchase most of the electricity produced by a hydroelectric plant to be constructed on the site of the Churchill Falls in Labrador at a fixed rate that would decrease in stages over time, determined in accordance with the final capital cost of the project.

CFLCo contested the validity of the contract on the basis that the extent of the profits now being realized by Hydro-Québec was unforeseeable in 1969, such that an injustice had resulted. Invoking the obligation to act in good faith, the obligation to cooperate and the obligation to exercise contractual rights reasonably, CFLCo argued that Hydro-Québec was bound to renegotiate the terms of the contract, particularly those involving pricing.

The Quebec Superior Court2, in a decision written by Justice Silcoff, concluded that the relationship between the parties was not based on an equal sharing of the risks and benefits flowing from the contract, given that Hydro-Québec had assumed most of the risks, thereby allowing CFLCo to obtain the required financing for the construction of the plant, in return for guaranteed price stability affording protection from inflation and increases in operating costs.

On appeal, a five-member bench of the Quebec Court of Appeal unanimously upheld the trial judgment and dismissed the appeal, expressing the view that the parties freely and voluntarily entered into a contract providing for fixed rather than indexed prices, despite being fully aware that energy prices could fluctuate over time. The Court stated that CFLCo was seeking to alter the very nature of the contract3 and that the obligation of good faith under articles 6, 7 and 1375 of the Civil Code of Québec did not oblige Hydro-Québec to renegotiate its terms.

The Court of Appeal did however indicate that it was open to a limited application of the doctrine of unforeseeability, through the prism of the obligation to act in good faith, an openness never before seen in Quebec law. For the Court did not rule out the possibility that in a situation involving "hardship" as defined in the Unidroit Principles, the party who is refused a delay, an easing of its obligations, an adjustment of the contract or any other objectively reasonable, non-prejudicial concession from the perspective of its co-contractor could argue before the court that its co-contractor is not respecting the requirements of good faith4.

Such circumstances were not however shown to exist in this case. Any unforeseen change in the circumstances surrounding the performance of the contract had not rendered performance more onerous for CFLCo, but simply more beneficial for Hydro-Québec.


In a 7-1 majority decision, the Supreme Court of Canada dismissed CFLCo's appeal, on the ground that there is no legal basis in Quebec civil law for its claim.

The Court first of all pointed out that the contract between the parties cannot be characterized as a joint venture contract or a relational contract. As the parties clearly set out in their initial contract a series of defined and detailed performance obligations, no important obligations of that nature were left undefined. Thus, the parties' intention was not to cooperate or to flexibly coordinate on an economic basis over time, in order to fill any gaps in the contract.

The Court next decided that there is nothing in the contract requiring Hydro-Québec to cooperate with CFLCo or renegotiate the fixed prices: "there is no gap or omission in the scheme of the Contract that requires this Court to read an implied duty into the Contract in order to make it coherent"5.

The Court stated that it is not appropriate to develop a doctrine of unforeseeability based on good faith or equity in Quebec law. It pointed out that the doctrine of unforeseeability is not recognized in Quebec civil law, having been expressly rejected by the legislature at the time of the reform of the Civil Code. According to the Court, "any development of concepts analogous to unforeseeability in Quebec law must take account of the legislature's choice not to turn this doctrine into a universal rule"6. Moreover, in this instance unforeseeability could not be relied on by CFLCo in order to oblige Hydro-Québec to renegotiate the contract, since the agreement had not become less beneficial for CFLCo, but simply more beneficial for Hydro-Québec7.

The Supreme Court also concluded that the obligations of equity and good faith do not inherently create an obligation to renegotiate on the part of Hydro-Québec. The obligation of good faith adresses the legislature's concern to protect the equilibrium of contracts but "it cannot be used to violate that equilibrium and impose a new bargain on the parties"8. Despite the fact that its application must remain flexible, the concept of good faith cannot be broadened to impose a duty to renegotiate a contract, and the duty to cooperate with the other party does not mean that one's own interests be sacrificed. Furthermore, applying the concept of equity would be to indirectly introduce either lesion or unforeseeability into Quebec law in every case. To do so "would conflict sharply with the legislature's intent"9.

That being said, the Supreme Court noted that in a situation of "hardship" corresponding to the description of that concept in the Unidroit Principles, the conduct of the contracting party that benefits from the change in circumstances "cannot be disregarded and must be assessed"10. The Court thus did not rule out the possibility that the obligation of good faith may require a contracting party to act in such a way as to limit the consequences of an unforeseen change in circumstances that renders performance of the contract excessively onerous for the other party.

Finally, the Court pointed out that "in any event, CFLCo's action is prescribed"11, as the situation in this case does not constitute a breach of an ongoing duty or a continuing fault. And because the most recent event to have disrupted the energy market occurred in 1997, the action has been prescribed since the end of 2000 at the latest.

This important decision confirms the validity of the contract entered into by the parties in 1969, reaffirms the scope of the obligations of good faith and equity and establishes the inapplicability of the doctrine of unforeseeability in Quebec civil law. It puts a long-awaited end to this third attempt by CFLCo and the province of Newfoundland & Labrador to convince the courts to amend the contract.

Written in collaboration with articling student Laurence Angers-Routhier.


1 Churchill Falls (Labrador) Corporation Limited v. Hydro-Québec, 2018 SCC 46 (the "SCC Judgment")

2 Churchill Falls (Labrador) Corporation Ltd. v. Hydro-Québec, 2014 QCCS 3590

3 Churchill Falls (Labrador) Corporation Ltd. v. Hydro-Québec, 2016 QCCA 1229, para. 99

4 Supra, note 2, para. 155

5 SCC Judgment, para. 75

6 Ibid., para. 105

7 Ibid., para. 89

8 Ibid., para. 107

9 Ibid., para. 109

10 Ibid., para. 113

11 Ibid., para. 133

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions