Summary

37238

Churchill Falls (Labrador) Corporation Limited v. Hydro-Québec

(Quebec) (Civil) (By Leave)

(Sealing order)

Keywords

Contracts - Performance - Good faith - Unforeseen event - Appropriate standard of foreseeability and its effect on intention of parties - Characteristics of relational contracts and whether greater duty of co-operation they involve can include obligation to renegotiate or adjust terms of contract - Appropriate remedy should party fail to discharge obligation to renegotiate - Civil Code of Québec, CQLR, c. CCQ-1991, arts. 6, 7 and 1375.

Summary

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On May 12, 1969, the appellant Churchill Falls (Labrador) Corporation Limited and the respondent Hydro-Québec entered into a contract pursuant to which the respondent undertook to purchase almost all the power generated by a hydroelectric plant that was to be built on the Churchill River in Labrador. That contract, which had a 65-year term, set a fixed price for the power that was to decrease in stages over time. The contract contained no price adjustment clause.

On February 23, 2010, the appellant instituted an action against the respondent in the Quebec Superior Court, arguing that the magnitude of the respondent’s profits resulting from the current value of electricity had been unforeseeable in 1969 and was causing an injustice. It submitted that the obligation to act in good faith and the obligation to exercise contractual rights reasonably that are provided for in the C.C.Q. imposed a duty on the respondent to renegotiate the terms of the contract.

The Superior Court dismissed the action, and the Court of Appeal affirmed the judgment. It found that, except in cases of real hardship, the general principle of good faith set out in articles 6, 7 and 1375 C.C.Q. was of no assistance to a party in the appellant’s situation.

Lower Court Rulings

July 24, 2014
Superior Court of Quebec

2014 QCCS 3590, 500-17-056518-106
Motion to institute proceedings dismissed
August 1, 2016
Court of Appeal of Quebec (Montréal)

2016 QCCA 1229, 500-09-024690-141
Appeal dismissed