Canada: SCC Confirms A "Deal Is A Deal": Party Not Allowed To Re-Negotiate A Contract Because It No Longer Liked The Terms

Last Updated: December 10 2018
Article by Katherine Reilly and Ruth Nieuwenhuis

In the recent Supreme Court of Canada ("SCC") case, Churchill Falls (Labrador) Corp v Hydro-Québec ("Hydro- Québec"),1 the Court upheld the terms of a nearly 50 year old contract and confirmed the adage, "a deal is a deal."

In 1969, after lengthy negotiations, Hydro-Québec and the Churchill Falls (Labrador) Corporation ("CFLCo") entered into a contract to build a hydroelectric power station located on the Churchill River. Under the terms of the agreement, Hydro-Québec assumed the majority of the risk associated with the contract including the cost of construction overruns. Hydro-Québec also agreed to purchase most of the electricity generated by Churchill Falls at fixed prices regardless of need. Fast forward 50 years and, by 2009, electricity prices were significantly higher than they were in 1969. As a result, the fixed prices that at one time represented a significant risk to Hydro-Québec, now saw Hydro-Québec reaping substantial profits.

In a 7-1 decision affirming the decisions of the lower courts, the SCC found that, despite the disproportionate amount of profit, the parties nonetheless got what they bargained for. The Court determined that it had no basis to force Hydro-Québec to renegotiate the contract in the absence of any wrongdoing.

While the case was decided on principles found in Quebec's civil law regime, this decision nevertheless features some important reminders for corporate clients across Canada regarding commercial contracts and the laws that govern them.

Reminder #1: You can't get out of a contract just because it turned out to be a bad deal

Contracts between commercial parties are typically carefully negotiated with each side taking on varied levels of risk in return for something of value. Often, parties must make educated guesses when considering "known unknowns" such as price fluctuations and changes in the market that can impact the level of risk or reward they are taking on. Sometimes, as was the case in Hydro-Québec, those decisions turn out to be poor business decisions and one party is stuck with the losing end of the deal.

In Hydro-Québec, the SCC acknowledged that parties often accept risks when entering into a commercial contract, including the risk that unforeseen circumstances could affect the profitability or financial outcomes of a business arrangement. Importantly, the SCC's decision confirms that a party who, in hindsight, has made a "bad" deal is stuck with that bargain. The SCC articulated this point as follows:

...when all is said and done, CFLCo is replace the Contract with a new agreement by undoing certain aspects of the Contract while keeping the ones that suit it...[and] it is asking its contracting partner to give up the benefits it obtained in exchange for the sacrifices it made during the first few years of the project...[n]either good faith nor equity justifies granting these requests.2

The SCC's decision highlights the applicability of the "high risk, high reward" concept. In this case, Hydro-Québec accepted much more risk than CFLCo did (a fact of which CFLCo was fully aware) and, accordingly, Hydro-Québec also reaped the benefits when the profits turned out to be much greater than anticipated. Finding yourself in a bad deal doesn't constitute a legal basis for the courts to re-open the contract that was entered in situations where the parties are of substantially equal bargaining power.

Reminder #2:Make sure your contract says everything it needs to say

The SCC's decision also serves as a reminder that commercial parties should ensure that their contracts comprehensively and accurately capture the obligations of both parties. In other words: if you want a renegotiation clause, make sure it appears explicitly in the contract!

The courts will not find an implied obligation where none exists. Reading in an implied term occurs only in very limited circumstances in which a gap must be filled in a contract in order to make it coherent. Implied clauses are not a mechanism for the courts to add duties to a contract after the fact. In Hydro-Québec the court found that there was no gap or omission in the contract and the words of the contract did not support CFLCo's arguments that there was an implied renegotiation clause in the contract.

Reminder #3: Acting in good faith doesn't mean sacrificing one's own interest

The principles of good faith and equity serve to connect legal principles with concepts of fairness, but what they don't do is alter the agreed-to equilibrium of a contract, or impose a new bargain on the parties.

In Hydro-Québec, the Court noted that there was nothing about the relationship between CFLCo and Hydro Québec or the circumstances of the case that would justify an intervention on the basis of good faith or equity. There was neither inequality in bargaining power nor vulnerability in their relationship. Both parties to the Contract were experienced commercial entities, and the conduct of the parties demonstrated that they intended for one party to bear the risk of fluctuations in electricity prices.

The Court observed that CFLCo's reliance on concepts of equity and good faith in a contractual case such as this was part and parcel of its argument that a change in the circumstances of the parties to a contract was sufficient to justify the renegotiation of the contract. The Court observed that such an approach was out of step with the very purpose of contracts which, by their very nature, are binding and are intended to provide certainty to the parties.

The Court concluded that neither good faith nor equity could be used to order the sharing of profits that are honestly earned pursuant to the contract; nor could the concepts be expanded to penalize a party whose conduct has not been unreasonable. The concept of good faith does not negate a party's right to rely on the words of the contract. Refusing to renegotiate or share profits is not contrary to a party's duty of good faith in the absence of any wrongdoing or unreasonable behaviour.


This case confirms that courts cannot (and will not) intervene in a contractual relationship simply because the agreement entered into turns out to be a bad deal for one party. This is particularly so in circumstances where the contract adequately reflects the agreement reached by parties who are of equal bargaining power. Absent misrepresentation, mistake, frustration, illegality, or issues of capacity, a "deal is a deal," and parties to a contract must live with the terms of their bargain.


[1] 2018 SCC 46.

[2] Ibid at para 138.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2018

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.

Katherine Reilly
Ruth Nieuwenhuis
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
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