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Why d Ya Do It? The Supreme Court Of Canada Explains The Duty To Exercise Contractual Discretion In Good Faith - Corporate/Commercial Law

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

Supreme Court of Canada Clarifies Duty to Exercise Contractual Discretion in Good Faith | Littler

Callow, which expanded a contracting party’s duty of honesty, was released in December 2020; however, the SCC’s decision in Wastech, which clarifies the duty to exercise contractual discretion in good faith, was not released until early this month.  Although Wastech involved a commercial contract, it has implications for all contracts in which a party has discretionary power, including any such contracts entered into by employers. Background In 1996, Wastech Services Inc., a waste transportation company, entered into a long-term contract for waste disposal with the Greater Vancouver Sewerage and Drainage District (Metro), a corporation that disposed of municipal waste.  The contract provided that waste could be disposed of in three landfills, one of which was much farther away than the others.  Wastech’s profits under the contract were highest when it disposed of waste in the landfill farthest away; the contract provided that Metro had “absolute discretion” in allo

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