E. A Duty to Bargain in Good Faith in the Absence of a Contract?

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 151-156

Page 151

Finally, it may be asked whether a duty to bargain in good faith could arise in circumstances where the parties were plainly at the negotiation stage of their relationship. If a duty were to be imposed in such circumstances, of course, it would appear to be tortious rather than contractual in nature. There being no contractual relationship between the parties, the enforcement of a duty to negotiate in good faith would need to find a footing in either some existing tort or in a newly recognized tort of bad-faith bargaining. Unsurprisingly, given the reluctance of common law courts to enforce contractual undertakings to bargain in good faith, the traditional view is that there exists no duty to bargain in good faith as a separate and discrete tort. A more difficult question, however, is the extent to which such a duty might be discovered to be inherent in existing categories of tortious obligation.

The possibility that a duty to bargain in good faith might be grounded in tort law or in a tort-like duty has been the subject of discussion in two recent cases. In the first, Westcom TV Group Ltd. v. CANWEST Global Broadcasting Inc.,⁵³the parties were television networks who were negotiating over the sale of programming, one to the other. The defendant network, which had no right to broadcast in the area in which the plaintiff operated, had negotiated a number of short-term agreements to sell its programs to the plaintiff in the past. The parties successfully negotiated an agreement for a new ten-year agreement but it was plainly understood that the agreement would be subject to the approval of the Chair of the Board of the defendant corporation. Such approval was not forthcoming. The plaintiff alleged that the defendant had never intended to enter into such an agreement but, on the contrary, had determined to apply for its own licence to broadcast within the plaintiff’s

Page 152

licensed area. It was further alleged that the reason why the defendant was conducting these intentionally fruitless negotiations with the plaintiff was that the defendant had an ulterior motive of wanting to demonstrate to the regulator that it could not negotiate a successful arrangement for selling its programming to a broadcaster in the plaintiff’s area of operation. The plaintiff argued that this conduct constituted a breach of duty to negotiate in good faith. The plaintiff conceded that its damages were, at best, nominal but claimed, as well, for exemplary damages in order to prevent what was alleged to be the unjust enrichment of the defendant.

The defendant’s application for summary dismissal of the action enjoyed success. Lowry J. quoted from Lord Ackner’s comments in Walford v. Miles,⁵⁴reproduced above,⁵⁵and suggested that negotiating parties must be permitted some latitude in misrepresenting their intentions. Lowry J. commented as follows:

Parties involved in arm’s length negotiations commonly conceal their true intentions. It is part of the negotiating process that positions are advanced that do not represent what a party truly expects or is prepared to agree to in the end. A party may well say it will pay no more than a stated amount, or agree on no more than a limited term, when in fact it would pay more or agree on a longer term in order to conclude a deal. Intentions are, in that sense, commonly "misrepresented" in the interests of achieving a better bargain in the end.⁵⁶Noting that Lord Ackner had indicated in Walford that a negotiating party must nonetheless avoid making "misrepresentations," Lowry J. went on to observe that "Lord Ackner’s reference to misrepresentations could only have meant misrepresentations about the subject of the contract, not about the party’s true intentions."⁵⁷This proposition is surely a doubtful one, however, as it is well established in other contexts that a false statement of current intention may constitute misrepresentation.⁵⁸In any event, the judge noted that the relationship of the parties in the present case was punctuated by a history of litigation and of documented lack of trust with respect to the negotiating positions taken by both parties. There were accordingly no reasonable expectations...