Legal Blog

Arbitration, Good Faith, & Limits of Damages

Alectra Utilities Corporation v. Solar Power Network Inc. 2018 Ont SCJ

Contract had wide arbitration clause. Contract allowed the financial party to issue a termination notice in its discretion. The arbitrator held that there was an implied term of the contract to exercise that right in good faith and that the financial party breached that implied term. The arbitrator then calculated the damages ignoring a stipulation in the contract that damages were not to include loss of profit. The court agreed with the arbitrator regarding the breach, but held that, based on a reasonable interpretation, the general clause allowing damages had to be informed by a specific clause disallowing loss of profit in any calculation of damages. The judge also noted that there was no free standing concept of good faith; it was an integral part of the contract and accordingly, a breach of that contract had to incorporate the contractual provisions setting out the excluded damages.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.