The Supreme Court of Canada granted leave to appeal in August 2013 in one case that is likely to be of significant interest to Canadian franchisors and franchisees. The decision, Bhasin v. Hrynew 2013 ABCA 98, from the Alberta Court of Appeal held that the corporate defendant did not have to act in good faith in exercising a right to give notice to end a contract. The contract provided for an initial term of three years and which would be automatically renewed for successive three year periods, unless either party notified the other at least six months prior to the end of the current term that they wanted to end the agreement. The provision read:
3.3 The term of this Agreement shall be for a period of three years from the date hereof (the “Initial Term”) and thereafter shall be automatically renewed for successive three year periods (a “Renewal Term”), subject to earlier termination as provided for in section 8 hereof, unless either CAFC or the Enrollment Director notifies the other in writing at least six months prior to expiry of the Initial Term or any Renewal Term that the notifying party desires expiry of the Agreement, in which event the Agreement shall expire at the end of such Initial Term or Renewal Term, as applicable.
The Court refused to imply a term in the agreement that a party seeking to terminate it must have good reason for doing so. As the Court wrote: “The parties did not intend or presume a perpetual contract, as they contracted that either party could unilaterally cause it to expire on any third anniversary.”