The civil law approach to franchising was, for a considerable time, largely ignored within franchising because franchising was developed in the United…
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Wastech:
Confirms that the duty to exercise
discretionary contractual powers in good faith, like the duty of
honest contractual performance, applies to all contracts and cannot
be excluded by the parties;
Clarifies that the duty is breached
where a party exercises a contractual power unreasonably , meaning in a manner not connected to the
underlying purposes for which the discretion is granted;
Mandates that when ascertaining
whether an exercise of discretion is unreasonable, and therefore a
breach of the duty, the court must interpret the contract (the first source of justice between the parties ) as a
whole. The content of the duty is guided by the intentions of
Wastech, the Court
clarified the content of another doctrine flowing from the
organizing principle: the duty to exercise contractual discretion
in good faith.
Background
Wastech involved a waste transportation company
(Wastech) and a corporation responsible for municipal waste
disposal (Metro). In 1996, Wastech and Metro entered into a
contract for waste disposal services that contemplated disposing
waste in three landfills, one of which was much farther away than
the others. The contract stated Metro had absolute
discretion in allocating the amount of waste to go to this
farther facility.
In 2011, Metro exercised this discretion by directing less waste
to go to the farther facility, causing Wastech to receive a lower