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ABUSIVE OR UNCONSCIONABLE CLAUSES FROM A COMMON LAW
PERSPECTIVE
Stephen Waddams "'
It is a pleasure to comment on Professor Grammond's interesting,
informative, and suggestive paper. The same tensions that he
identifies in Quebec law can be discerned also in Anglo-Canadian
law: putting the matter in the most general terms, the idea of
sanctity of contract has been balanced against the desire of courts
to avoid enforcement of contracts that have been perceived as very
unfair. Perspectives on this question have varied markedly over
time, and different solutions have been devised for different
problems, producing, in common law fashion, what may more readily
be called a patchwork than a mosaic. Professor Grammond's paper
concentrates on the avoidance of "abusive or unconscionable"
clauses. One word in Professor Gramn1ond's title is associated, in
its origins, with French law; the other with English equity.
To put this question into context from the perspective of
Anglo-Canadian law it is necessary to examine briefly the
jurisdiction, originally exercised by the courts of equity to set
aside unconscionable transactions, to examine 19th-century
attitudes in relation to the equitable jurisdiction, and then to
examine the rather convoluted history in the 20th century of the
treatment of clauses limiting or excluding liability, variously
known as exemption clauses, exclusion clauses or disclaimer
clauses.
Since comparison between different legal systems is relevant,
reference will be made to a recent European harmonization
docun1ent, Principles, Definitions and Model Rules of European
Private Law: Draft Common Frame of Reference (DCFR). This useful
document, published in six volumes in 2009 with commentary and
notes, supplies an accessible comparison of all the continental
European systems with each other and with English and Irish law in
respect of each particular proposed rule of contract law, and is
therefore of particular interest to a comparison
Universil.y Professor and holder of the Goodman/Schipper Chair,
faculty of Law, University of Toronto.
378
Reproduced from Stephen Waddams, "Abusive or Unconscionable
Clauses from a Common Law Perspective" (2010) 49 Canadian Business
Law Journal 378-399, by permission of Thomson Reuters Canada
Limited.
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201 O] Abusive, Unconscionable Clauses, Common Law
Perspective
between civil and common law in the Canadian context. Some
concluding remarks wiH be made on the concept of good faith, also
inentioned at several points by Professor Grammond.
Since the 19th century, writers on English contract law have
e1nphasized the enforceabi1ity of contracts, and have tended to
1narginalize the instances in which contracts have been set aside
for unfairness. In dealing with consideration it has been common to
point out that inadequacy of consideration is not, in itself, a
defence to contractual obligation, and from this "elementary
principle," as Pollock called it, it has been inferred that, if
there is sufficient consideration to meet the test of contract
fonnation, the contract must be enforceable. Frederick Pollock in
the first edition of his treatise (1876) wrote that it was a
distinguishing mark of English jurisprudence that the amount of the
consideration is not 1nateria1. "The value of all things contracted
for is measured by the appetite of the contractors, and therefore
the just value is that which they be contented to give." It is
accordingly treated as an elementary principle that the law will
not enter into an inquiry as to the adequacy of the consideration.
1
The power of English courts to set aside contracts on grounds
broadly relating to unfairness and inequality of exchange was,
however, considerably wider than the extracts from Pollock's book
suggested. The first published treatise on English contract law (by
John Joseph Powell, 1790) included a long chapter entitled "Of the
Equitable jurisdiction in relieving against unreasonable Contracts
or Agreements. "2 Powell stated that the mere fact of a bargain
being unreasonable was not a ground to set it aside in equity,
for contracts are not to be set aside, because not such as lhe
wisest people would make; but there must be fraud to make void acts
of this solemn and deliberate nature, if entered into for a
consideralion.3
But Powell went on to point out that "fraud" in equity had an
unusual and very wide meaning:
And agreements lhat are not properly fraudulent, in that sense
of the term
1. F. Pollock, Principles of Contract at Law and In Equity:
Bd11g a Treatise on the General Principles Concerning the Validity
of Agreements, With a Special View to the Comparison of Law and
Equity, and With References to the Indian Contract Act. and
Occasionally to Roman, American, and Continental Law (London,
Stevens and Sons, I 876), p. 154, quoting T. Hobbes, Le11iathan
(1660), pt. l, ch. 15.
2 . J.J. Powell, Essay Upon the Lmv of Contracts and Agreements
(London, J. Johnson and T. Whieldon, 1790) vol. 2, p. 143.
3. [hid. , p. 144.
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380 Canadian Business Law Journal [Vol. 49
which imports deceit, will, nevertheless, be re1ieved against on
the ground of inequality, and imposed burden or hardship on one of
the parties to a contract; which is considered as a distinct head
of equity, being looked upon as an offe nce against morali[y, and
as unconscientious. Upon this principle, such courts will, in cases
where contracts are unequal, as bearing hard upon one party .. .
set them aside.4
Powell gave as an example the very common provision in a
mortgage that unpaid interest should be treated as principal and
should itself bear interest until paid. PowelJ wrote that "this
covenant will be relieved against as fraudulent, because unjust and
oppressive in an extreme degree."5
The very wide meaning thus given to the concepts of "fraud" and
"fraudulent" i11dicates that the power to set aside contracts was
much wider than at first appears. Pollock, in his chapter on duress
and undue influence, also explained to his readers that "fraud"
could not be taken at face value:
The term fraud is indeed of common occurrence both in the
earlier and in the later authorities: but "fraud does not here mean
deceit or circumvention; it means an unconscientious use of lhe
power arising out of these circum-stances and conditions": and thjs
does not come wilhin the proper meaning of fraud, which is a
misrepresentation . .. made with lhe intenl of creating a
particular wrong belief in the mind of the party defrauded. Perhaps
the besl word to use would be imposition, as a sort of middle term
between fraud, to which it comes near in popular language, and
compulsion, which it suggests by its elymology .6
Jt is significant that Pollock, in elucidating the meaning of
the word fraud, should consciously look for an equally ambiguous
word (imposition), suggesting, on the one hand, the taking of
unfair advantage, and, on the other hand, actual compulsion.
The court of equity commonly gave relief against forfeitures of
all kinds. The most clearly established case was that of a
mortgage. Mortgage documents usually provided that, on default in
repayment, the la nd should be forfeited to the mortgagee. The
courts consistently refused to enforce this simple provision,
despite the fact that it was well known and perfectly clear.
Whatever form of words was used - even if the document evidenced an
outright conveyance of the land - the court, if convinced that the
substance of the transaction was a secured loan, refused to enforce
the document and permitted the borrower to redeem the land:
4. Ibid., pp. 145-146. 5. Ibid., p. 146. 6. Pollock, supra,
foolnote J, alp. 527.
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
381
So that in every mortgage the agreement of the parties upon the
face of the deed, seems to be, that a mortgage shall not be
redeemable after forfeiture ...
. . . [A]nd a mortgage can no more be irredeemable than a
distress for rent-charge can be irrepleviable. The law itself will
control that express agreement of the party; and by the same reason
equity will let a man loose from his agreement, and will against
his agreement admit him to redeem a mortgage.7
No restriction, even by express agreement, was permitted on the
right to redeem. In Spurgeon v. Collier (1758) Lord Northington
said that "[t]he policy of this court is not more complete in any
part of il than in its protection of mortgages ... ; and a man will
not be suffered in conscience to fetter himself with a limitation
or restriction of his time of redemption. It would ruin the
distressed and unwary, and give unconscionable advantage to greedy
and designing persons. "8 This last sentence compendiously
illustrates the impact of the separate but interlocking concepts
that have run through the unconscionability cases: lack of consent,
avoidance of unjust enrichment, and deterrence of wrongdoing, all
linked with "the policy of this court." A few years later the same
judge again ljnked the concepts of reason, justice, freedom of
consent, and deterrence of trickery:
The court, as a court of conscience, is very jealous of persons
taking securities for a loan, and converting such securities into
purchases. And therefore I take it to be an established rule, that
a mortgagee can never provide al the lime of making the loan for
any event or condition on which the equity of redemption shall be
discharged, and Lhe conveyance absolute. And there is great reason
and justice in tills rule, for necessitous men are not, truly
speaking, free men, but, to answer a present exigency, will submit
to any terms that the crafty may impose upon lhem. 9
Forfeiture in its various forms has obvious advantages lo the
secured party, and it is not surprising that attempts were made by
lenders to secure equiva]ent advantages without the immediate
transfer of the property to be forfeited. The growth of the penal
bond represented such an attempt. A common form of the bond was a
covenant to pay a fixed sum of money unless some other act was
performed by a certain date. The effect was lo secure the
7. Howard v. Harris (1681), I Vern. 190 alp. 192, 23 E.R. 406.
This passage from the argument of successful counsel was cited,
with page reference and near quotation, as having assisted in
establishing the law on the point, by R.H. Coote, A Treatise on the
Law of Mortgage (London, Butterworth & Son, 1821), p. 22.
8. (1758), I Eden 55, 28 E.R. 605 (L.C.) (Sir R. Henley). 9.
Vernon v. Bethell (1762). 2 Eden 110 alp. 113, 28 E.R. 838
(H.C.).
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382 Canadian Business Law Journal [Vol. 49
performance of the other act, which might itself be the payment
of a sum of money that had been lent by the obligee to the
obligor.
The court of equity gave relief from such bonds on much the same
principle as in cases of mortgages. The bond was, in SLLbstance, a
device to secure repayment of a loan, and the legitimate interest
of the lender was in repayment of the principal (together with
interest and costs) and no more. In 1880 the law on the point, out
of keeping though it was with the spirit of the 19th century, was
explained by Bramwell L.J. (who, though not himself sympathetic,
accepted that this was the law) as follows:
[T]he Court of Chancery said Lhat a penalty Lo secure the
payment of a sum of money or the performance of an act should not
be enforced; the parties were nol held Lo their agreement; equity
in truth refused to allow Lo be enforced what was considered to be
an unconscienLious bargain. 10
Another judge said, in 1900:
The Court of Chancery gave relief against the striclness of lhe
common law in cases of penalty or forfeiture for non-paymeut of a
fixed sum on a day certain, on lhe principle that the failure to
pay principal on a certain day could be compensated sufficiently by
payment of principal and interest with costs al a subsequent day.
11
Important also was the obvious factor that a borrower in urgent
need was apt to sign too readily an extravagant penal bond: the
need for the funds was always immediate, and the possibility of
enforcement of the bond remote.
The English courts of equity relieved against transactions
entered into by persons expecting to own property in the future.
The typical case was of the "expectant heir," and this phrase,
together with the otherwise obsolete phrase "catching bargain," is
generally used to denote this branch of English law, but the
jurisdiction was not restricted to heirs: it extended to every kind
of case in which the "borrower" expected to become the owner of
property in the future. The substance of the transaction was a
loan, but commonly the transaction took the form of a sale of the
expectancy, or of the reversion. The court would set aside the
transaction unless the purchaser proved that he had given full
value. As in the case of mortgages and penalties, the situation is
one in which experience shows that a person, pressed with the
immediate need for 1noney, is apt to sell a future interest at an
undervalue - someti1nes at a gross undervalue: again, the need
for
10. Protector E11dowme11f loan Co. l'. Grice (1880), 5 Q.B.D.
592 (C.A.), p. 596. 11. Dixon ( /11 re); Heyes v. Dixon, [1900] 2
Ch. 561 (C.A.), p. 576, p er Rigby L.J.
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
383
money is immediate, and the interest given up seems remote. So
ready was the court to set aside such transactions that the rule
came to seem too rigid: a statute of 1867 provided that such
transactions should not "be opened or set aside merely on the
Ground of Undervalue." 12 The statute, however, did not affect the
general jurisdiction of the court to set aside unconscionable
transactions, 13 and this Jine of cases supplies an important
illustration of that wider jurisdiction, before and after
1867.14
Pollock said, in his first edition, that "practically the
question is whether in the opinion of the Court the transaction was
a hard bargain.'tl5 -
Disadvantageous contractual transactions have frequently been
set aside for "undue influence." This phrase covers a number of
different circumstances. It may apply to an openly hostile
relationship where one party threatens the other with adverse
consequences if the .agreement is not made. Such a case was
Williams v. Bayley16 where a son had forged his father's signature
to promissory notes, and the creditor threatened to prosecute the
son unless the father agreed to pay the debt. More commonly the
phrase has been applied to situations related to fiduciary duties
where one party reposes trust in the other. Certain categories of
case have been said to give rise to a presumption of undue
influence, but it is not necessary for the weaker party to bring
his case into a recognized category: any case in which there is a
relationship of trust or confidence may qualify for relief. A
20th-century instance of a case that does not readily fall into any
pre-existing category is one where an employee guaranteed her
employer's debts. The guarantee was set aside by the English Court
of Appeal. Millett L.J. used strong language, very reminiscent of
the older equity cases:
This transaction cannot possibly stand ... It is an extreme
case. The transaction was not merely Lo the manifest disadvantage
of Miss Burch~ it was one which, in the traditional phrase, "shocks
the conscience of I.he court''. Miss Burch committed herself to a
personal liability far beyond her slender means, risking the loss
of her home and personal bankruptcy, and obtained nothing in return
beyond a relatively small and possibly temporary increase in the
overdraft facility available to her employer, a company in
12. An Acl to amend the Law relating to Sales of Reversions, 31
Viel. c. 4 (!867), s. 1. 13. Earl of Ayles.ford 1'. M orris (1873),
L.R. 8 Ch. 484 (C.A.), p. 490. 14. See the passage quoted at
footnol.e 20, below. l 5. Poltock, supra, footnote I. at p.
534-535. 16. (1866), L.R. 1 H.L. 200.
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384 Canadian Business Law Journal [Vol. 49
which she had no financial interest. The transaction gives rise
to grave suspicion. It eries aloud for an explanation. 17
Closely related, and perhaps conceptually indistinguishable, 18
are cases where the relationship between the parties is categorized
as fiduciary.
The courts of equity exercised a nlore general jurisdiction to
set aside transactions that they regarded as very unfair. In Evans
v. Llel-vellin where a disadvantageous transaction was set aside
despite the absence of any kind of misrepresenlation, concealment
or non-disclosur.e, Kenyon M.R., relying on a cumulation of
considerations, had evidently been chaJlenged to explain and
formulate an appropriate principle:
I am called upon for prineiples upon which I decide this case;
but where there are many members of a case, it is not always easy
to lay down a principle upon which to rely. How.ever, here, I say,
the party was taken by surprise; he had not sufficient time to act
with eaution; and therefore though there was no actual fraud, it is
something like fraud, for an undue advantage was taken of his
situation. The eases of infants dealing with guardians, of sons
with fathers, all proceed on the same general principle, and
establish this, that if the party is in a situation, in which he is
not a free agent, and is not equal to protecting himse(f this Court
will protect him. 19
In 1888, summarizing the cases, Kay J. said:
The result of the decisions is that where a purchase is made
from a poor and ignorant man at a considerable undervalue, the
vendor having no independent advice, a Court of Equity wil1 set
aside the transaction.
This will be done even in the case of property in possession,
and a fortiori if the interest be reversionary.
The circumstances of poverty and ignorance of the vendor, and
absence of independent advice, throw upon the purchaser, when the
transaction is impeached, the onus of proving, in Lord S el borne'
s words, that the purchase
"t . . d bl "20 was au, .1ust, an reasona e.
Was undervalue alone a sufficient ground for. relief at the
beginning of the 19th century? This question is not easy to answer
because of the elusive meaning of"fraud." There are, indeed, nlany
statements by courts and comn1entators lo the effect that
underva]ue alone was insufficient, but these cannot be taken at
17. Credit Lymmais Bank Nede1•land NV v. B11rc'1, [1997) I All
E.R. 144 (C.A.), p. 152. 18. See Lloyds Bank v. Bundy, [1975] Q.B.
326, [1974] 3 All E.R. 757 (C.A.). 19. (1787), 1 Cox 334, p. 340 29
E.R. 1 l91 (emphasis in original). 20. Fry v. Lane (1888), 40 Ch.
D. 312, p. 322. Lord Selborne's words were from
Morris v. Earl of Ayles/f>rd, supra, footnote 13 above, p.
491.
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
385
face value because of frequent indications that a gross
undervalue created a "presumption of fraud": where there was a
large inequality of exchange the court could presun1e, without any
separate proof, that the disadvantaged party must have been
labouring under some sort of mistake or disability, or else must
have been influenced by necessity, or by some sort of pressure, or
by a relationship with the stronger party.2 1 Son1e cases and
contemporary comments suggest that the presumption was practically
irrebuttable.22
Inequality of exchange was not, in itself, conclusive, but it
does not follow that it was irrelevant: a large inequality of
exchange may be said to have called for some sort of explanation
(which nught be that a part-gift was intended, or that the
inequality was caused by risks fairly allocated by the
transaction).23
An attempt in the 20th century by Lord Denning24 to restate a
general principle in terms of unfairness and ine~uality of
bargaining power was rejected by the House of Lords, 5 but the
older cases were not overruled, and Lord Denning's state1nent has
been cited with approval in Canadian cases.26 In Anglo-Canadian
law, as in Quebec law, the fear has been that an unfettered power
to set aside contracts for reasons of unfairness would be too
broad, and various attempts have been ma.de lo restrain the
practical opera tion of the doctrine. As Professor Grammond
mentions, it has been said in a number of cases that two ele1nents
are needed: inequality of bargaining power, and undue advantage
ta.ken of it.
21. Earl of Cheste1field \I. Janssen (1750), 2 Ves. Sen. 125, 28
E.R. 82 (H.C.); Heathcote v. Paignon (1 787), 2 Bro. C.C. 167, 29
E.R. 96 (H.C.).
22. Morse v. Royal (1806), 12 Ves. 355, [1803-13) All E .R. Rep.
232 (LC.), pp. 371-372 (Ves.); Lowthel' I'. Lowther (1 806), 13
Ves. 95, 34 E .R. 1115; Crowe ir . Ballard (1790), 30 E.R. 118, I
Ves. Jr. Supp. 91 (note by John Hovenden); Henry Ballow, A Treatise
of Equity (London, 1737), P- 11; J. Story, Commentaries on Equity
Jurisprudence as Administered in England and America (Boston,
Hillard , Gray & Co., 1836), p. 250. .
23. Rotheram v. Browne (174 7), 8 Bro. P.C. 297, 3 E.R. 594 (H
.L.) (part gifl); Mortimer v. Capper (1 782), 1 Bro. C.C. 156, 28
E.R. 1051 (H.C.) (inherent risk).
24. Lloyds Bank v. Bun~y, supra, footno te 18, above. 25.
National Westminster Bank Pie. v. Morgan, [1985] A.C. 686, [1985) 1
All E.R . 821
(H.L.). 26. McKenzie v. Bank of Montreal (1975), 55 D.L.R. (3d)
641 , 7 O.R. (2d) 521
(H.C.J.), affd 70 D.L.R. (3d) 113, 12 O.R. (2d) 719 (C.A.);
Royal Bank of Canada 1'. Hinds (1978), 88 D .L.R. (3d) 428, 20 O.R
. (2d) 613 (H.C.J.); Nardocchio 11. Canadian Imperial Bank of
Commerce (1979), 41 N.S.R. (2d) 26 (S.C.); Harry 11. Kreutz iger
(1978), 95 D .L.R. (Jd) 231, 9 B.C.L.R. 166 (C.A.); A & K
Lick-a-Chick Franchises Ltd. v_ Cordi1• Enterprises Ltd. (1981),
119 D.L.R. (3d) 440, 44 N .S. R. (2d) 1 (S.C.T.D.); Kerr Controls L
td. v. Waldick (1994), 133 N.S.R. (2d) 207, 48 A.C.W.S. (3d) 1406
(S.C.).
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386 Canadian Business Law Journal [Vol. 49
This distinction corresponds in some degree, though not
precisely, with the distinction, also discussed by Professor
Grammond, between procedure and substance. Also relevant, as
Professor Grammond points out, is the distinction between the
concept of mistake in contract formation, and a test of unfairness.
None of these distinctions can explain all the past cases, and
none, standing alone seems to offer a satisfactory guide for the
future. It would be true to say of the co1n1non law, as Professor
Gra1nmond says, in two very suggestive phrases, of the civil law,
that the law has not been "boxed into rigid categories of procedure
and substance" and that "there appears to be some sort of osmosis,
or synergy, between the two categories."
The Draft Common Frame of Reference includes the following:
II - 7:207 Unfair exploitation (1) A party may avoid a contract
if, at t.he time of the conclusion of the
contract: (a) the party was dependent on or had a relationship
of trust with the
other party, was ln economic distress or had urgent needs, was
improvident, ignorant., inexperienced or lacking in bargaining
skill; and
(b) the other party knew or could reasonably have been expected
to have known this and, given the circumstances and purpose of the
contract, exp]oi ted the first party's si tuation by taking an
excessive benefit or grossJy unfair advantage.
(2) Upon the request of the party entitled to avoidance, a court
may if it is appropriate, adapt the contract in order to bring it
into accordance with what might have been agreed had the
requirements of good faith and fair deaJing been observed . ..
II - 7:208 Third persons (l) Where a person for whose acts a
party is responsible or who with a
party's assent is involved in the making of a contract: (a)
causes a mistake, or knows of or could reasonably be expected
to
know of a mistake; or (b) is guilty of fraud, coercion, threats
or unfair exploitation, remedies
under this Section are available as if the behaviour br
knowledge had been that of the party.
(2) Where a third person for whose acts a party is not
responsible and who does not have the party's assent to be involved
in the making of a contract is guilty of fraud, coercion, threats
or unfair exploitation, remedies under this Section are available
if the party knew or could reasonably be expected to have known of
the relevant facts, or at the time of avoidance has not acted on
the contract. 27
27. Christian von Bar, Eric Clive, Hans Schulte-Nolke et al.,
eds., Principles, Definitions and Model Rules of European Private
law: Dra/i Common Frame of Reference, luterim Outline ed., prepared
by the Study Group on a European Civil Code and the Research Group
on EC Private Law (Acquis Group) (Munich,
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
387
The comment states that " the Article adopts the principle that
a contract which gives one party excessive advantage and which
involved unfair exploitation may be avoided at the request of the
disadvantaged party."28 Here are several concepts very familiar to
Anglo-Canadian lawyers.29 The factors mentioned in 7:207(l)(a)
(dependence, trust, economic distress, urgent needs, improvidence,
ignorance, inexperience, lack of bargaining ski11) largely echo
expressions used in Anglo-Canadian courts and tend to suggest lack
of consent. The concept in paragraph (b) of "knew or could
reasonably be expected to have known" echoes the equitable concept
of constructive notice. The requirement of the means of knowledge
on the part of the stronger party tends to suggest an element of
wrongdoing, but the open-ended indication of what it is that might
reasonably have been known (" this" referring to the list in
7:207(1 )(a), and "the relevant facts" in 2:708(2)) leaves much
flexibility. The phrases "excessive benefit" and "grossly unfair
advantage" echo phrases like "immoderate gain" and "undue
advantage," and suggest unjust enrichment. But lack of consent,
wrongdoing, and unjust enrichment are not expressly required to be
proved. The provision in 7:208 on third persons echoes the concerns
of Anglo-Canadian courts30 in attempting to deal with the
responsibility of lenders to guarantors influenced by family
members and others. The inclusion of these various elements in a
carefully considered international document suggests that it has
not been possible to reduce the issue to a single governing
concept: several concepts, not whoJly commensurable, appear to be
simultaneously in play.
One interesting phrase in 7:207(l)(b) is "given the
circumstances and purpose of the conlract." This invites the court
to look at the real substance of the transaction and ask whether
the enrichment can be justified by the allocation of risks properly
inherent in the particular kind of transaction. The sale of a
reversionary interest in land was, on the face of it, a sale of an
interest in land. If that were the real substance of the
transaction, that is; if the seller were
Sellier, 2008). These provisions were adapted from 0. Lando and
H . Beale, eds., Principles of European Contract Law (The Hague,
1999).
28. Comment A, vol. I, p. 507. 29. The English Jaw on undue
influence and unconscionability is referred to in Note
4, as is the Consumer Credit Acl, vol. I , pp. 511-512. 30.
Bertolo v. Bank of Montreal (1986), 33 D.L.R. (4th) 610, 57 0 .R.
(2d) 577 (C.A.);
Barclays Bank Pie. 11. O'Brien, (1994) 1 AC 180, [1993] 4 All
E.R. 417 (H.L.); Gold l'. Rosenberg, [1997] 3 S.C.R. 767, 152 D
.L.R. (4th) 385; Roya{ Ba11/c of Scotland pie I'. Etridge (No. 2),
[2002) 2 A.C. 773, [2001] UKHL 44.
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388 Canadian Business Law Journal [Vol. 49
dealing in a fair market for the purchase and sale of future
property interests, a very large enriclunent to either party would
be wholly defensible if it arose from risks inherenl in the
purchase and sale of property, for example an unexpected rise in
land values after the date of the contract. The allocatio11 of that
risk is the very nature of the contract, and the buyer takes a
corresponding risk of a fall in values: general contractual
principles give strong support for enforcement even if there is a
substantial enrichment to the buyer. The buyer, in that case, would
simply have made a profitable and legitimate bargain. But, if the
real substance of the transaction is a loan, the court will compare
the net effect of the iransaction with the terms on which money
could be borrowed in a fair market for the lending of money, and
will not allow the lender to extract what is, in effect, an
extravagant rate of interest. The point was made in an 18th-century
case:
An annuity may be purchased al as low a rate as you can,
provided it was the original negotiation to purchase and sell an
annuity: but if the treaty began about borrowing and lending, and
ends in the purchase of an annuity, it is evident, that it was only
a method or contrivance to split the payment of the principal and
usurious interest into several instalments, and consequently that
it was a shift ... So, in the sale of goods or merehandise it is
lawful to sell as dear as you can, on a clear bargain by the way of
sale: but if it is first proposed to borrow, and afterwards to sell
goods beyond the market price, this is usurious.3 1
Another interesting phrase is in the closing words of 7:208,
allowing avoidance of a contract induced by a third party "if the
(other contracting] party ... at the time of avoidance has not
acted on the contract," even if that party had no means of
knowledge of the relevant facts. This phrase recognizes a
distinction between what Anglo-Canadian lawyers might call the
"expectation interest" and the "reliance interest." The party
seeking enforcement may be deprived of the right of full
enforcement unless there has been reliance. It must follow that if
there has been fonited reliance the disadvantaged party may escape
the consequences of full enforce1nent on compensation of the other
party's reliance, for it can scarcely be a working legal rule that
a million-dollar transaction becomes fully enforceable because the
p·arty seeking enforcement has incurred the cost of a postage
stamp. Where the
.. weaker party has, by his or her own foolishness, caused
actual out of pocket loss, there is a strong argument for requiring
the weaker party, as a condition of relief, to reimburse the other
party's actual 31. Earl of Cheste~field i•. Janssen , supra,
footnote 21 above (Lord Hardwicke).
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
389
loss. But this concept does not support fu11 enf orce1nent of
the stronger party's expectation interest. The distinction
corresponds to that made in some old cases, where the weaker party
was successfu1 in setting aside the impugned transaction, but was
required to pay the other party's costs, and suggests that a choice
of "all or nothing" is not always necessary or desirable. The fact
that these provisions have been included in a draft to which
European civil and common lawyers have both contributed strongly
suggests that it is no less important now than it was 250 years ago
lo avoid transactions that would "ruin the distressed and unwary,
and give unconscionable advantage to greedy and d
. . ,,32 es1gmng persons. · One method of denying validity to
burdensome clauses has been
by concluding that there has been insufficient assent to the
clause. F ormerly it was taken to be the law that signature was
conclusive evidence of assent, but in Tilden Rent-a-Car Co. v.
Clendenning, 33 a burdensome clause was invalidated by the Ontario
Court of Appeal even though the clause was contained in a signed
docun1ent. Professor Grammond discusses this case in his paper. As
he rightly says, the case depends primarily on the concept of lack
of assent, but, as he also points out, the burdensome nature of the
clause was plainly also influential. The Draft Common Frame of
Reference lays down a very similar rule:
II.- 9: I 03: Terms not individually negotiated (1 ) Terms
supplied by one party and not individually negotiated may be
invoked against the other party only if the other party was
aware of them, or if the party supplying the terms took reasonable
steps to draw the other party's attention to them, before or when
the contract was concluded.
(3)
(b) terms are not sufficiently brought to the other party's
attention by a mere reference to them in a contract document, even
if that party signs the document.
In the mid-20th century a technique developed for the control of
clauses limiting liability (disclaimer, exemption, or exclusion
32. See Spurgeon v. Collier, supra, footnote 8, above. 33.
(1978), 83 D .L.R. (3d) 400, 18 O.R. (2d) 601 (C.A.). The preceding
pages are
partly based on S. Waddams, "Proteetion of Weaker Parties in
English Law," in M. Kenny, J. Devenney and L. Fox O'Mahoney, eds.,
Unc01iscionahility in European Private Fi11ancial Transactions:
Pmtecting the Vulnerable (Cambridge, Cambridge University Press,
2010).
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390 Canadian Business Law Journal [Vol. 49
clauses). The concept, largely developed by Lord Denning,34 was
that a disclaimer clause could not be enforced if there had been a
fundamental breach (or breach of a fundamental term). The concept
suffered from lack of clarity as to whether it rested on
interpretation, or on an overriding rule of law, and it failed to
distinguish between consumer and non-consumer contracts, or between
fair and unfair clauses. Largely for these reasons it was rejected
by the House of Lords, first in 1966, 35 and then, definitively, in
1979. 36 These House of Lords cases were approved in Canada, 37 but
uncertainty remained after Hunter Engineering Co. v. Sync rude
Canada Ltd. 38 in which two judges of the Supreme Court of Canada
held that the test of validity was unconscionability, and two
others held that the test was whether it would be unfair or
unreasonable to give effect to a disclaimer clause. The doctrine of
fundamental breach was finally, it would seem, laid to rest in
Tercon Contractors L td. v. British Columbia ( Ministry of
Transportation and Highways) ,39 where Cromwell J. said, for the
majority:
On the issue of fundamental breach in relation to exclusion
clauses, my view is that the time has come to Jay this doctrine to
rest, as Dickson C.J. was inelined to do more than 20 years ago: H
unter Enginee,.;ng Co. 11. Syncrude Canada Ltd . ... I agree with
the analytical approach that should be followed when tackling an
issue relating to the applicability of an exclusion clause set out
by my colleague Binnie 1.40
Binnie J., stating the view of the whole court on this point,
said that
On this occasion we should again attempt to shut the coffin on
the jargon associated with "fundamental breach". Categorizing a
contract breach as " fundamental" or "immense" or "colossal" is not
particularly helpful. Rather, the principle is that a court has no
discretion to refuse to enforce a valid and applicable contractual
exclusion clause unless the plaintiff ... can point to some
paramount consideration of public policy sufficient to override
the
34. Lord Denning summarized the rise and fall of fundamental
bre
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
391
public interesl in freedom of contact and defeat what would
otherwise be the contractual rights of lhc parties .... There is
nothing inherenlly unreasonable about exclusion clauses.41
The approach now approved by the Supreme Court of Canada is
first to interpret the clause (the question on which the court
divided in the Tercon case). Then, "[i]f the exclusion clause
applies, the second issue is whether the exclusion clause was
unconscionable at the time the contract was made, 'as might arise
from situations of unequal bargaining power between the parties'
... "42 If the clause is applicable and valid on these tests, it
should be enforced unless contrary to an overriding public
policy.43 This decision marks a definitive preference for Dickson
C.J .C. 's view in Hunter: the nature of a breach may be relevant
to the interpretation of an exclusion clause, but, no matter how
grave the breach, there is no rule of law that clauses limiting or
excluding liabi1ity are invalid, provided that they are not grossly
unfair (unconscionable) at the time of the agreement, and that they
do not contravene an overriding public policy. The decision is also
significant in its recognition of unconscionability as an
independent ground for selling aside very unfair contracts, and lhe
in1plication of this is nol only that exemption clauses may be
enforceable if not unconscionable, but that other kinds of unfair
clauses may be disallowed if they are unconscionable.44
The Drafl Common Frame of Reference includes, in addition to the
general provision already mentioned on "unfair exploitation," quite
delailed provisions on "unfair terms," distinguishing three classes
of contract, namely, those between a business and a consumer, those
between non-business parties, and lhose between businesses. In a
business/consumer contract a term is unfair "if it has been
supplied by lhe business and if it significantly disadvantages the
consumer contrary to good faith and fair dealing.'' In a later
section there is a long list of terms presumed to be unfair in
business/consumer contracts. In a contract where neither party is a
business, a tenn is unfair "only if il is a lerm 41. /d.,at para..
82. 42. Id., para. 122, quoting from Hunter, at p. 462. 43. Id.,
para. 123. See para. 119, referring to Plas-Tex Canada Ltd. v. Dow
Chemical
of Canada Ltd. (2004), 245 D.L.R. (4th) 650, 2004 ABCA 309,
leave to appeal to S.C.C. refused 250 D.L.R. (4th) vii, [2005] l
S.C.R. ix, where the defendant was found to have engaged in
deceptive conduct.. Another example given of overriding public
policy was selling products known to be dangerous lo life.
44. Another recent Supreme Court of Canada case recognizing the
doctrine of unconscionabilily in the family law contexl, is Rick
11• Bra11dsema, [2009] I S.C.R. 295, 303 D.L.R. (4th) 193.
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392 Canadian Business Law Journal [Vol. 49
forming part of standard terms supplied by one party and
significantly disadvantages the other party contrary to good faith
and fair dealing." In case of contracts between businesses a term
is unfair "only if it is a term fonning part of standard terms
supplied by one party and of such a nature that its use grossly
deviates from good commercial practice, contrary to good faith and
fair dealing. "45
Unconscionability, as a general concept for dealing with unfair
contract terms, has certain merits, but also certain drawbacks. It
has the advantages of being a concept applicable to all kinds of
contract, while indicating, by implication, that its application
must be highly exceptional. On the other hand, the word has certain
disadvantages. It has sometimes been taken to suggest wrongdoing,46
but many cases, old and modern, have held that proof of wrongdoing
is not a requirement for relief,47 and it is implied by Tercon that
the clause might have been found to be unconsionable without any
proof of independent48 wrongdoing on the part of the government.
The cases on penalty clauses and exemption clauses have never
involved any wrongdoing on the part of the party seeking
enforcement. Another difficulty is that unconscionability suggests
the need to prove inequality of bargaining power, but in some kinds
of case, including relief against penalty clauses, inequality of
bargaining power, in the ordinary sense of the words, has not
always been required. A simpler general concept, therefore, and a
useful synonym for unconscionability may be unfairness: a contract
may be set aside if it produces consequences that are very unfair.
Such a general concept is capable of recognizing distinctions, such
as those made in the Draft Common Frame of Reference, between
business and consumer contracts, and between standard forms and
terms individually negotiated. 45. DCFR, II-9: 401-410. 46. Hart v.
O'Connor, [1985] A.C. 1000 at p. 1028, (1985] 2 All E. R. 880
(P.C.); Cain
v. Clarica Life Insurance Co. (2005), 263 D.L.R. (4th) 368, 2005
ABCA 437, para. 32; Titus v. William F. Cooke Enterprises Inc.
(2007), 284 D.L.R. (4th) 734, 2007 ONCA 573, at para. 38.
47. Earl of Aylesford "· Morris (1873), L. R. 8 Ch. App. 484, at
p . 499 ("The Appellant is not alleged or proved to have been
guilty of deceit or circumveution .. . "); Boker 11. Monk (1864), 4
De G.J. & S. 388 al pp. 393-394, 46 E.R. 968; Woods v. Hubley
(1995), 130 D.L.R. (4th) 119 aJ pp. 128-129, 146 N.S.R. (2d) 97
(C.A.), leave lo appeal lo S.C.C. refused 136 D.L.R. (4th) vii, 152
N.S.R. (2d) 15911; Morsha/I v. Canado Permanent Trust Co. (1968),
69 D. L.R. (2d) 260 (Alta. S.C.); Lloyds Bank v. Bundy, supra,
footnote 18, above.
48. fnclependent, tha t. is, of lhe insertion of a clause
enforcement of which 1s subsequently detennined to be
unconscionable.
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
393
The Quebec concept of "abusive clauses" discussed by Professor
Gram1nond offers an interesting alternative approach. There has
been occasional support in Anglo-Canadian law for the concept of
"abuse" as a limit on contractual rights. Denning L.J. said, in l
949, that "there is the vigilance of the common law which, while
allowing freedom of contract, watches to see that it is not
abused."49 Professor Ernest Weinrib has favoured the concept of
"abuse of rights" as a limit on the exercise of contractual
remedies. 50 On the other hand, there wonld be some conceptual
difficulty in importing the concept of abuse of rights into
Anglo-Canadian contract law, in that it might seem that a right
that cannot be exercised in certain circumstances is something less
than a right in the usual sense. A search for precision would seem
to require a redefinition of the right itself, rather than a
general judicial power which inight seem to make the enforcement of
all rights discretionary. Lord Reid inade substantially this point
in l 96 l in a Scottish case, recognizing no distinction between
Scottish and English law on this point:
It might be, but it never has been, the law that a person is
only entitled to enforce his contractual rights in a reasonable
way, and that a court will not support an attempt to enforce them
in an unreasonable way. One reason why that is not the law is, no
doubt, because it was thought thal it would create too much
uncertainty to require the court to decide whether it is reasonable
or equitable lo allow a party to enforce his full rights under a
contract.5 1
On the other hand, there would be certain attractions in
recognizing something like a discretionary power in a judge of
first instance, perhaps restricted to consumer transactions and
standard form contracts, to set aside unfair clauses, without the
necessity for elaborate reasons likely to set precedents for future
cases, thereby causing alarm in the corridors of businesses and of
their legal advisers, inviting inconclusive and repetitive appeals
to the appellate courts.
A concept sometimes associated with abuse of rights is good
faith, to which reference has been made by Professor Grammond. The
phrase occurs frequently in the Draft Common Frame of Reference, as
appears from some of the earlier quotations. The
49. John Lee & Son (Grantham) Ltd. v. Railway Executi1•e, fl
949) 2 All E.R. 581 at p. 584, 65 T.L.R. 604 (C.A.).
50. Ernest Weinrib, "Two Conceptions of Remedies," in Cha rles
E.F. Rickett, ed., Just(fying Pdvate Law Remedies (Oxford, Hart
Publishing, 2008), p. 3.
51. White and Carter (Councils) Ltd. t>. McGregor, [1962)
1A.C.413 al.p. 430, [1961} 3 All E.R. 1178 (H.L., Sc.).
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394 Canadian Business Law Journal [Vol. 49
concept of good faith, though not itself described as an
underlying principle, is discussed in the Draft Common Frame of
Reference as part of the underlying principle of "justice," with
the sub-headings "Not allowing people to rely on their own
unlawful, dishonest or unreasonable conduct," "No taking of undue
advantage," and "'No grossly excessive demands. "52 These
sub-headings indicate thal considerations of policy, in the sense
of what were lhought to be desirable standards of behaviour, were
not absent from the minds of the drafters. The Draft Common Frame
of Reference includes a duty of good faith, and in a noie to the
relevant article the drafters comment that, although England and
Ireland do not recognize a general obligation lo conform to good
faith and fair dealing,
many of the results which in other legal systems are achieved by
requiring good faith have been reached in England and Ireland by
more specific rules ... Thus to some extent [the present Article]
merely articulates trends already present in English law. But the
English approach based on construction of the agreement is a weak
one as it cannot prevail against clear contrary provisions in the
agreement ... Thus [the Article] represents an advance on English
and Irish law.53
This passage~ it may be observed, shows some indications of
committee drafting, and some indications of wishful thinking.
Inconsistent lines of thought can be discerned: this Article will
make no substantial difference to English law; or not very much; in
any event the trends are in this direction; at least they should be
in this direction if English law is to advance.
The object of this observation is not to criticize the drafters.
From Lheir poinl of view harmonization was, understandably, an
overriding objective, and this could not have been achieved without
including some provision on good faith because all European
countries except England and Ireland recognized some version of
it.54 But the Notes point out that there is a considerable
variation among lhe ciyil law jurisdictions as to the meanin~ and
significance of good faith, and to the prominence of its role. 5 It
is likely, lherefore, that, if the Draft Common Frame of Reference
were adopled in Anglo-Canadian law, different meanings of "good
faith" would emerge in differenl contexts.
52. DCFR, Principles, paras. 42-44, vol. I , pp. 54-55. 53.
DCFR, Note 7 to Ill - I: 103, Fl11l Edition, vol. I , p. 68 I. 54.
DCFR, Notes I and 2 to Ill - 1:103, Full Edition, vol. I, pp.
679-680. 55. Ibid.
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201 O] Abus;ve, Unconscionable Clauses, Common Law Perspective
395
Good faith is a concept that has been used in different senses
to address several distinct questions in contract law. These
questions include, among others: whether pre-contractual
negotiations can be broken off; whether material facts known to one
party must be disclosed to the other in pre-contractual
negotiations; whether contracts are enforceable if induced by
misrepresentation or mistake; whether and to what extent the courts
should imply terms into contracts; whether terms that are very
unfair can be enforced; whether non-performance by one party
excuses the other; whether deliberate breaches of contract justify
punitive damages; and whether the exercise of contractual rights
may in some circumstances be restrained or precluded. The concept
of good faith, as applied to these various problen1s, necessarily
varies substantially in meaning and significance, and for that
reason it is not possible to assign a single meaning to the
concept, nor is it plausible to call "good faith," when applied to
such disparate questions, a single principle. The phrase suggests
disapproval of selfish motives, but selfish motives could not, in
all contractual disputes, be conclusive against a party
entertaining them; nor could pure unselfish motives in themselves
enlarge contractual rights, or excuse a party who was actually in
breach of a contractual obligation. Neither could the motives of
either party be conclusive on the question of whether contractual
terms were unfair. It may seem attractive, or innocuous, to embrace
an overriding principle of good faith, but the effect of doing so
on the scope of contractual rights and obligations would be far
from clear: a contractual right that could only be exercised for
unselfish reasons would, to the extent that it could not be
exercised, lack the usual characteristics of a "right."
It would, indeed, be possible to conceive of the whole of
contract law as the embodiment of the idea of good faith. Frederick
Pollock wrote in the third edition of his treatise in I 881, and
repeated in subsequent editions, that
the law of Contract is in truth nothing else than the endeavour
of the sovereign power, a more or less imperfect one by the nature
of the case, to establish a positive sanction for the expectation
of good faith which has grown up in the mutual dealings of men of
average right-mindedness.56
Evidently Pollock was thinking of good faith primarily as
supplying a reason for enforcement of prmnises, not as a limit
56. F. Pollock, Principles of Co11trac1, 3rd ed. (London,
Steveus and Sons, 1881 ), p. xx.
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396 Canadian Business Law Journal [Vol. 49
on enforcement. He meant that the rules of contract law, taken
as a whole, themselves reflected the community's sense of what good
faith required ·--- an idea that Pollock came to associa te with
protection of reasonable expecta tions - not that good faith should
be deployed to modify or displace the actual rules of English con
tract !aw: a contracting party must defer to the other party's
interests insofar, but only insofar, as the contract requires him
or her to do so. Whether as a reason for enforcement or as a limit
on enforcement, the adoption of good faith as a general principle
could no t eliminate the need for particular rules in the various
contexts in which it has been invoked, and, as suggested, it seems
probable tha t such particular rules would develop in
Anglo-Canadian law if the Draft Common Fraine of Reference were
adopted, or if a feneral concept of good faith were adopted fr0111
another source.5
The phrase "implied term" has been used in contract law with
several different meanings. 58 Sometimes it means what the parties
actually agreed; sometimes what they would probably have agreed if
they had contemplated the issue that has arisen; very often it
means what reasonable persons would have agreed if they had
contemplated the issue in question. The meanings have overlapped in
application because it is easy to presume tha t contracting parties
intend what is reasonable, and this presumption creates a
convenient correspondence between the intention of the parties and
the justice of the result.
The last meaning (what reasonable persons would have agreed)
necessarily imports the court's own sense of justice, for a writer
(court or commentator) of course attributes to hypothetical
reasonable persons an agreement tha t leads to a fair, just, and
reasonable result. This approach has been used to avoid unfair
results, by introducing implied terms to the effect that, despite
appearances, the parties cannot truly have intended to agree to
anything that would lead to a very unequal exchange. The approach
has also been employed in order to relieve against the effects of
mistake and of unexpected changes in circumstances. The attraction
of this approach is that both kinds of problem (unfairness and
mistake) can be resolved without apparently departing from an
application of the parties' intention. But the appearance is, in
the end, illusory, because the court necessarily
57. See also Waddams, "Good Failh, Unconscionability, and
Reasonable Expecta-tions" (1995), 9 .J .C.L. 55.
58. Leaving aside, in the present discussion, terms "implied by
law."
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
397
imports its own view of what is fair and just in the
circumstances. Lord Wright wrote, in 1939, that "the judge finds in
himself the criteria of what is reasonable. The Court is in this
sense making a contract for the parties - though it is almost
blasphemy to say so. " 59 In a recent case another English judge,
recognizing thal the court's power to imply tern1s goes beyond what
is strictly "necessary,'' said lhat "questions of reasonableness,
fairness and the balancing of competing policy consideration" are
more important than "the elusive standard of necessity. "60
1l is true to say that, as the drafters of the Draft C01nmon
Frame of Reference suggested, Anglo-Canadian law has, by implying
terms and by other techniques of interpretation, often reached the
same results as would, in other systems, be reached by application
of concepts of good faith, or of "good faith and fair dealing. "61
l mplied terms, however, are in one sense wider, and in another
sense narrower than what is suggested by the phrase "good faith."
Absence of good faith, in any ordinary sense of the words, is not a
requirement for implication of a term, and the presence of good
faith is not a defence to an action for breach of an implied term.
A party's belief, no matter how honest and reasonable, that he or
she is not bound by a particular obligation is wholly irrelevant if
the court finds that the obligation has, as a matter of Jaw, been
incurred. The Supren1e Court of Canada nut.de this point in a case
in which a term had been iinplied into an invitation for tenders
for a construction project, with the result that the defendant was
held liable to an unsuccessful tenderer for accepting a
non-compliant bid. The defendant claimed that it had acted in
perfect good faith, honestly believing that it had no such
obligation to unsuccessful tenderers, and there is no need to doubt
this claim, since it was quite reasonable as the law had formerly
stood. But the daim was rejected:
The respondent's argument or good faith in considering the . . .
bid to be compliant is no defence to a claim for breach of
contract: it amounts to an argument that because it thought it had
interpreted the contract properly it cannot be in breach. Acting in
good faith or thinking that one has interpreted the contract
correctly are not valid defences to an action for breach of
~ 62 contract.
59. Lord Wright of Durley, Legal Essays and Addresses
(Cambridge, Cambridge University Press, 1939), p . 259.
60. Dyson L.J. in Cl'ossley 11• Faitl!ful/ & Gould Holdings
Ltd., [2004) EWCA Civ. 293. 61. The phrase "good faith and fair
dealing" appears in the Second Restatement of
Contracts (1979), s. 205, referring to the Uniform Commercial
Code, 1-201(19) and 2-l03{1)(b), and in the Draft Common Frame of
Reference, Ill ·- 1: 103.
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398 Canadian Bus;ness Law Journal [Vol. 49
It is only by giving a very special m.eaning to the phrase that
the result in this case, or the results in 1nany other cases of
implied terms, could be said to depend on "good faith."
Canadian courts have used the phrase "good faith" with approval
in various contexts,63 but the Ontario Court of Appeal, sounding a
note of caution, has indicated both the limitations of the concept
of good faith, and its proper scope:
... Canadian courts have not recognized a sLand-alone duty of
good faith that is independent from Lhe terms expressed in a
contract or from the objectives thal emerge from those provisions.
The in;ipJication of a duly of good faith has not gone so far as to
create new, unbargained-for, rights and obligations. Nor has it
been used to alter lhe express terms of Lhe contract reached by the
parties. Rather, courts have implied a duly of good faith with a
view to securing the perfonnance and enforcement of the contracL
ma.de by the parties, or as it is sometimes puL, to ensure that
parties do noL act in a way Lhat eviscerates or defeaLs the
objectives of the agreement that they have enLered into ... 64
Good faith has thus been accepted as a useful tool of
interpretation, as a relevant, though not conclusive test in
pre-contractual negotiations, and it has son1etimes been used to
summarize the power of the court, discussed earlier in this paper,
to set aside agree1nents for unconscionability, or unfairness. But
it has not been generally accepted as empowering courts to override
the provisions of a fair and reasonable agreement properly
interpreted, or to create obligations that cannot be derived from
the parties' actual agreement. Good faith has an important role in
determining the extent of contractual obligations, but it is not a
substitute for the concept of unfairness, and it cannot be accepted
as a carte blanche for the creation or dissolution of contractual
obligations without further reasoning. Another aspect of the matter
is that good faith might be categorized (though 62. M.J.B.
Enterprises Ltd. v. Defence Co11structio11 ( 1951) Ltd., [1999) I
S.C.R. 619,
170 D.L.R. (4th) 577, at para 54. 63. Gateway Realty Ltd. 11•
Arton Holdings Ltd. (1991), 106 N .S. R. (2d) 180, 29
A.C.W.S. (3d) 262 (S.C.T.D.), affd 112 N.S.R. (2d) 180, 32
A.C.W.S. (3d) 1161 (S.C.A.D.) (implied term); Emp1·ess Towel's Ltd.
l'. Bank of Nova Scotia (1990), 73 D.L.R. (4th) 400, 50 B.C.L.R.
(2d) 126 (C.A.), leave to appeal lo S.C.C. refused 79 D.L.R. (4th)
vii, 60 B.L.R. 13611 (negotiation of option to renew lease).
64. Transamerica L(fe Canada Inc. v. JNG Canada Jn.c. (2003),
234 D.L.R. (4t.h) 367, 68 O.R. (3d) 457 (C.A.), at para. 53. See
also I 193430 Ontario Inc. 11. Boa-Franc ( 1983) Ltee. (2005), 260
D.L.R. (4th) 659, 78 O.R. (3d) 81 (C.A.), leave to appeal to S.C.C.
refused 262 D.L.R. (4th) vii, [2006] 1 S.C.R. vi; National Courier
Services Ltd. 11. RllK Hydraulic Cylinder Sen•ices Inc., [2006] 10
W.W.R. 166, 2005 ABQB 856 (no general duty of good faith requiring
landlord to apprise tenant of environmental audit results).
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201 O] Abusive, Unconscionable Clauses, Common Law Perspective
399
inappropriately, in my view)65 as a question of fact, and so
largely immune from appellate review, and a qllestion exclusively
for the j llry where there is a jury trial.
65. What a _person does, says, and thinks are questions of fact,
but whether a sequence of actions and thoughts should be
categorized as "bad faith" for legal purposes must, if it is
conclusive of a legal outcome, be a question of law. It seems
doubtful thal Auglo-Canadian commercial law would benefit, in
respect of ordinary commercial transaetions, from an inerease in
the unreviewable powers of trial judges to add to or subtract from
contractual obligations, or from lhe creation of further incentives
to seek jury trials iu the resolution of contractual disputes.
-
THE CANADIAN
BUSINESS LAW JOURNAL
REVUE CANADIENNE DU
DROITDE COMMERCE
VOLUME 49 2010
Editor in Chief/ Redacteur en chef
JACOB S. ZIEGEL
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CANADIAN BUSINESS LAW JOURNAL
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TABLE OF CONTENTS
EDITORIAL ............ .
ARTICLES AND SYMPOSIA
On Polyphony and Paradoxes in the Regulation of Securities
Within the Canadian Federation
185
Noura Karazivan a11d .lean-fl·anpois Gaudreault-DesBiens .
....... .
The Late, But Welcome, Arrival of a New Federal Not-for-Profit
Corporations Law
Wayne D. Gray. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 40 Subordination Agreements, Bankruptcy and the
PPSA
Roderick J. Wood. . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 66 Tercon Contractors: The Effect of Exclusion
Clauses on the
Tendering Process .lassmine Girgis. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . 187
Small Claims Court Identity Crisis: A Review of Recent Reform
Measures
Shelley McGill . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 213
The Regulation of Abusive or Unconscionable Clauses from a
Comparative Law Perspective
Sebastien Grammond . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 345
Abusive or Unconscionable Clauses from a Common Law
Perspective
Stephen Waddams. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 378
The Challenge of Jurisdiction: Van Breda ''· Village Resorts
Ltd. and Black v. Breeden
.loost B/01n . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . 400 The Priority Pitfall Problem: The
Contest Between Judgment
and Secured Creditors in Ontario Brian M. Studniberg . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . 425
COMMENTARIES
Solidarity, Unconscionability and Enforcement of Union Fines:
Birch v. Union of Taxation Employees, Local 70030
Michael Mac Neil . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 99 Restrictions on Unilateral Termination of
Franchise Agreements
.lonathan C. Lisus and Adam Ship . . . . . . . . . . . . . . . .
. . . . . . 11 3
Nareernx Import Co. Ltd. v. Canadian Imperial Bank of Commerce:
A New Implied Duty of Good Faith for Banks Issuing Letters of
Credit?
Bradley Crawford, Q.C. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 130
Doctrinal Reform and Post-Contractual Modifications in New
Brunswick: Nav Canada \I. Greater Fredricton Airpol'l Authority
Inc.
Rick Bigwood . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 256
v
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vi Canadian Business Law Journal [Vol. 49
I nsurancc Salvage Rights and the PPSA Anthony Duggan . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
Pa rt P ayment, Promissory Estoppel and Lord Denning's
"Brilliant" Balance
M.H. Ogilvie . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 287
Fundamental Breach is Dead; Or is it? Tercon Contractors Ltd. v.
British Columbia (Transportation and H;ghways)
Angela Swan and .lakub Adamski. . . . . . . . . . . . . . . . .
. . . . . . 452 Dead Man Walking? Malamas v. Crerar Properties
Corp. Affirms
a Dissolved Corporation's Right to Defend Itself Ray Tlwpar and
Ronald Podolny . . . . . . . . . . . . . . . . . . . . . . .
465
REVIEW ESSAYS AND BOOK REVIEWS
Critieal Moments and Turning Points in Law, Development and
Corporate Governance
GH Lan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 146 The Lia/e Book of Plagiarism, by Richard
A. Posner
( Mark Perry) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 166 Financial lnstiTUtions: The Regulatory
Framework, by
Christopher C. Nieholls (James C. Baillie) . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . 175
Agreements on Jurisdiction and Choice of Law, by Adrian
Briggs
( Vaughan Black ). . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 300 Antitrnsl and Global Capitalism 1930-2004,
by
Tony A. Freyer (Peter Carstensen) . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . 309
Economic Interests in Canadian Tort Law, by Peter T. Burns and
Joost Blom
( Hazel Carly) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 323
Democratizi11g Pension Funds: Corporate Governance and
Accountability, by Ronald B. Davis
(Freya Kodar) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 327 Corporate Social Responsibility: A Legal
Analysis, by Miehael
Ken , Riehard Janda and Chip Pitts (Sara L. Seek) . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
Cross-Border Litigation: h11erjurisdictio11al Practice and
Procedure, by Kenneth C. MacD onald
( Joost Blom) . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . 472
Mistakes in Contract Law, by Catharine MacMillan (David Capper)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
476
Proprietary Rights and lnsoll'ency, by Richard Calnan (Anthony
Duggan) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 483
Canadian Bankruptcy and l11so/ve11cy Law: Cases, Text and
Materials, by A. Duggan, S. Ben-lshai, T.G.W. Telfer , J .S. Ziegel
and R. Wood
(Ge~ffi·ey B. Morawe1z) . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 492
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2010] Table of Contents vii
Eligible Financial Contracts: A Legal Analysis, by Martin
Marcone (Christopher C. Nicholls) . . . . . . . . . . . . . . . . .
. . . . . . .. . . . . 496
Conflict of Laws, by Stephen G.A. Pitel and Nieholas S. Rafferty
(Janet Walker) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 502
LETTER TO THE EDITOR. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . 343