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The Enforceability of Covenants to Negotiate in Good Faith

When (ET)
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Toronto Office
333 Bay St., Suite 2400
Bay Adelaide Centre
Toronto, ON
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The good faith principle in Canadian contract law has been developing and the jurisprudence has become uncertain as to the extent that a covenant to negotiate in good faith may be legally enforceable. In the context of a “non-binding” letter of intent, a covenant to negotiate in good faith may create obligations that prevent a seller from invoking clear termination provisions. We will review the current state of the law on covenants to bargain in good faith and the practical dynamics of such a covenant, having regard to the relative ease of obtaining an interlocutory injunction to resist termination of the letter of intent and the relative difficulty of prevailing on a summary judgment motion for dismissal in the face of conflicting testimony as to the conduct of failed negotiations, which together make covenants to negotiate in good faith a potential trap for the unwary.

This program contains 1 hour of Substantive content