In our last newsletter (see April 2001 newsletter), we discussed Martel Building Ltd. v. Canada and bad faith bargaining. There have been two other cases opining on a cause of action for bad faith bargaining. In both of the cases, Midwest Management (1987) Ltd. v. B.C. Gas Utility Ltd, a November 2000 decision of the British Columbia Court of Appeal, decided before Martel, and PCC No. 505 v. Cam-Valley Ltd. (2001), 53 O.R. (3d) 1 (C.A.), a case decided after Martel, the courts rejected the notion of a cause of action for bargaining in bad faith. Good faith was recognised to have its place – but only in the performance of a contract, not in its creation.
These courts have drawn the line regarding good faith so that it applies only to situations arising after a contract has come into being. What takes place before the existence of a contract is not something that these courts will consider.