4. Churchill Falls (Labrador) Corp. v. Hydro‑Québec. Case Summary PDF

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MGMT 4230 CASE SUMMARY

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CASE SUMMARY

1.

Summary Date:

23 Oct 2019

2.

Case Name:

Churchill Falls (Labrador) Corp. v. Hydro‑Québec

3.

Court:

Supreme Court of Canada from QCCA

4.

Citation:

[2018] 3 SCR 101, 2018 SCC 46

5.

Plaintiff/Appellant:

Churchill Falls (Labrador) Corporation Limited (“CFLCo”)

6.

Defendant/Respondent:

Quebec Hydro-Electric Commission (“Hydro-Quebec”)

7.

Fact Summary:

8.

Plaintiff Argument

1. joint venture contract – duty to share contract benefits equitably 2. doctrine of unforeseeability requires renegotiation of the contract 3. principles of good faith and equity impose a duty to renegotiate

9.

Defendant Argument

1. insufficient day-to-day interaction to classify a relational contract 2. Quebec civil law does not recognize the doctrine of unforeseeability 3. principle of good faith does not require sharing profits that have been honestly earned

10.

Decision

Appeal dismissed. Hydro-Quebec does not have a duty to renegotiate the contract, even though the contract proved to be an unanticipated source of profits.

11.

Ratio deciendi

Courts will not compel parties to renegotiate contracts.

12.

Obiter dicta

Contractual terms that parties originally agreed to will be enforced even when the terms are not balanced.

The contract signed by the parties set out a legal and financial framework for building a hydroelectric plant on the Churchill River basin in Labrador. The terms of the contract made the project viable and attractive for each party. Hydro-Quebec agreed to purchase most of the electricity produced by the plant for a period of 65 years, ensuring CFLCo a stable return on its investment and allowing it to use debt financing for the construction of the plant. In return for their commitment, the contract provided Hydro-Quebec with the right to purchase electricity from the plant at fixed prices for the duration of the entire term of the contract. Nearly half a century later, changes in the electricity market caused Hydro-Quebec’s purchase price for electricity to fall below market prices. Hydro-Quebec now sells this electricity at current market prices to third parties, yielding a tremendous profit of $28 billion compared to CFLCo’s $2 billion profit. Both the trial court and the Court of Appeal ruled for Hydro-Québec.

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