The parties entered into a contract for the extraction of sand and gravel from an Indian Reserve. The permit was originally effective for five years. Under the permit, Mannpar was obliged to pay a modest yearly rental on the working area plots on the reserve, as well as a royalty on the materials removed. It was also required to do reclamation work on the area from which sand and gravel were extracted. The permit provided for a right to renew for a further five years, subject to satisfactory performance and renegotiation of the royalty rate and annual surface rental. The Band Council substantially agreed to the terms and conditions of the agreement between Mannpar and the Crown. Mannpar gave written notice of its intention to renew the permit for an additional five years. However, the Band became less satisfied with the permit arrangement. Neither the Crown nor the Band were prepared to renegotiate the royalty rate for the purpose of renewal. The Crown failed to renew the permit. Mannpar took the position that the Crown had repudiated its obligation to renew, and elected to accept the repudiation and commence an action for damages. At trial judge held that the renewal clause was void for uncertainty, which Mannpar appealed.
- Was the renewal clause void for uncertainty?
Hall, writing for the court, held that the language chosen in the renewal clause afforded the Crown considerable latitude in deciding whether to agree to any extension of the permit and in deciding what terms might be acceptable. No enforceable agreement arose out of the language of the renewal clause.
He distinguished Empress Towers Ltd. v Bank of Nova Scotia on the facts: there was no general market rate in this case, no element of objectivity, and no way to calibrate the value at hand.
There is no common law obligation to negotiate in good faith; it must be in the contract, either expressly or impliedly.