Court could not change content of contract, nor could it require parties to renegotiate it

Supreme court | Contracts | Construction and interpretation | General principles

In 1969, HQ and CF signed contract that set out legal and financial framework for harnessing hydro-electricity project. Parties chose to allocate risks and benefits of contract over 65-year period. Nearly 50 years later, purchase price for electricity set in contract was now well below market prices. Consequently, HQ sold electricity to third parties at current prices while continuing to pay CF price agreed on in 1969. CF brought action asking courts to order that contract be renegotiated and that its benefits be reallocated. Trial judge held that parties’ relationship was not based on equitable sharing of risks and benefits. HQ had acted in good faith and there was no justification for disregarding will of the parties. CF appealed. Court of Appeal found that trial judge made no palpable and overriding error and dismissed appeal. CF further appealed to Supreme Court of Canada. Appeal dismissed. Trial judge correctly defined parties’ intention and nature of the contract. Court could not change content of contract, nor could it require parties to renegotiate it. Therefore, there was no justification for requiring that contract be modified.

Churchill Falls (Labrador) Corp. v. Hydro-Québec (2018), 2018 CarswellQue 9514, 2018 CarswellQue 9515, 2018 SCC 46, 2018 CSC 46, McLachlin C.J.C., Abella J., Moldaver J., Karakatsanis J., Wagner J., Gascon J., Côté J., Brown J., and Rowe J. (S.C.C.); affirmed (2016), 2016 CarswellQue 7084, 2016 CarswellQue 8574, 2016 QCCA 1229, Schrager J.C.A., Thibault J.C.A., St-Pierre J.C.A., Mainville J.C.A., and Morissette J.C.A. (C.A. Que.).

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