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Love Thy Canadian Neighbor: Ontario Court of Appeal Addresses Franchisor's Duty of Good Faith Part Two of a Two-Part Series

BY Markus Cohen, Q.C., LL.M
August 01, 2003

The first installment of this series dealt principally with one of the issues before the Ontario Court of Appeal in Shelanu v. Print Three; namely, the unsuccessful attempt of the franchisor to exclude from enforceability an oral agreement made subsequent to a franchise agreement containing a comprehensive “entire agreement” clause. The other principal issue before the court was whether there was, at common law, a duty of good faith owed by a franchisor to its franchisee.

The Duty of Fair Dealing/Good Faith at Common Law

The existence and scope of the common law duty of good faith is long-established in the United States but has not been previously well-entrenched (except for certain contractual relationships under the common law of the provinces) in Canada. Shelanu v. Print Three revisits the denial of fiduciary duty in the landmark case of Jirna Ltd. v. Mister Donut of Canada Ltd., [1975] 1 S.C.R. 2. The court's discussion of good faith opens with a reference to the Wallace decision (Wallace v. United Grain Growers Ltd. (c.o.b. Public Press), [1997], S.C.J. 94) in the Supreme Court of Canada.

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