Legal Blog

Bad Faith Bargaining

In our last newsletter (see April 2001 newsletter), we discussed Martel Building Ltd. v. Canada and bad faith bargaining. There have been two other cases opining on a cause of action for bad faith bargaining. In both of the cases, Midwest Management (1987) Ltd. v. B.C. Gas Utility Ltd, a November 2000 decision of the British Columbia Court of Appeal, decided before Martel, and PCC No. 505 v. Cam-Valley Ltd. (2001), 53 O.R. (3d) 1 (C.A.), a case decided after Martel, the courts rejected the notion of a cause of action for bargaining in bad faith. Good faith was recognised to have its place – but only in the performance of a contract, not in its creation.

These courts have drawn the line regarding good faith so that it applies only to situations arising after a contract has come into being. What takes place before the existence of a contract is not something that these courts will consider.