Jedfro Investments v Jacyk: Commercial Certainty Maintained

Before 2007 fades too quickly in the rearview mirror, there is still time to stop and briefly visit the last Supreme Court of Canada (“SCC”) decision of the previous year. On Dec. 20, 2007, the SCC released their unanimous decision in Jedfro Investments (USA) Ltd v Jacyk, 2007 SCC 55. We first looked at this case here at back on Oct. 2, 2007, when Yu-Sung Soh provided a thorough synopsis of the facts and possible implications of the case. Please see his post for the background information of the case.

As Yu-Sung pointed out, the most contentious portion of the Court of Appeal decision (see (2006), 80 OR (3d) 533) was with regards to the enforceability of a contract when parties show indications of ignoring its provisions. At para 11, Laskin J.A. wrote,

Where parties act in a way that shows they do not intend to comply with or be bound by the terms of their written agreement, one party cannot later come to court and ask to have the agreement enforced for its benefit. Enforcing the written agreement in these circumstances would be contrary to the intention of the parties, as evidenced by their conduct.

The Decision

The SCC rejects such a low hurdle for discharging with the obligations of a contract. In reviewing the different ways in which a contract can be discharged, it reigns in the reach of the Court of Appeal decision, and provides guidance on when a contract can be discharged by agreement, and also when it can be discharged via repudiation.

With regards to discharge by agreement, the judgment states that “abandonment discharges a contract only if it amounts to a new contract in which the parties agree to abandon the old one” (para 17). In other words, absent a new (albeit implicit) contract, even if the parties show they do not intend to comply with the existing contract, its provisions remain in force.

With regards to discharge by repudiation, the Court states, “having ‘little regard’ for an agreement does not establish that a party is repudiating the agreement. Ordinary, non-repudiatory breach is consistent with ignoring the terms of an agreement. More is required to establish repudiation” (para 21) In effect, this requirement of something “more” prevents parties from claiming repudiation by ignoring the provisions of the contract.

In providing this guidance, the SCC promotes commercial certainty by avoiding a gap when no binding provisions apply during attempts to renegotiate an existing contract. Obligations and responsibilities thus remain clear during this period of time, and parties can structure their activities appropriately to apportion risk and expenses.

Applying their new interpretation to the case, the SCC found that the agreement was still in force; however, since the provisions therein were found not to have been breached, the appeal was dismissed.

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