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Contracts - Discretionary Terms
COMMENT
'Discretion' - although typically a feature of a more hierarchical relationship (eg. legislature to tribunal, judges to litigants) [see the Discretion topic generally], can also occur in the more ostensibly equal relationship between two (or more) contractual parties. Anytime the contract has terms or clauses that allow one party to exercise a unilateral choice (ie. not just a formal 'option', but on a more regular and day-to-day basis) then that party possesses 'discretion' in that respect (a simple example would be discretion over several choices of service method for contractual documentation).
Like to the broader field of legal institution discretion (linked above), most such 'contractual discretion' litigation contests 'how' or 'how far' the discretion may be exercised.
. 100 Bloor Street West Corporation v. Barry's BootCamp Canada Inc.
In 100 Bloor Street West Corporation v. Barry's BootCamp Canada Inc. (Ont CA, 2023) the Court of Appeal considered the Wastech case, which limits the allowed purposes of the exercise of a contractual discretion by a party - as a matter of the contractual duty of good faith:[7] Barry’s now appeals that decision. It has constructed an elaborate argument contending that the application judge committed an extricable error of law by erroneously identifying the purpose of the discretionary attribution subclause, thereby applying a mistaken assessment of reasonableness. This argument is crafted out of the decision in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, 454 D.L.R. (4th) 1, at paras. 88, 92, which holds that the exercise of a contractual discretion is unreasonable if it is unconnected to the purposes for which the discretion is granted. ... . Bowen v. JC Clark Ltd.
In Bowen v. JC Clark Ltd. (Ont CA, 2022) the Court of Appeal considered a contractual term that made consideration of a bonus discretionary to the employer:(i) Entitlement to the discretionary bonus under paragraph 5
[35] I do not accept the respondent’s position that the discretionary nature of the bonus provision in paragraph 5 of the employment agreements means that the employer was entirely unconstrained as to how that discretion was exercised. Where an employment agreement provides for a discretionary bonus, there is an implied term that the discretion will be exercised in a fair and reasonable manner: see Bain v. UBS, 2016 ONSC 5362, at paras. 85-90, aff’d 2018 ONCA 190, 46 C.C.E.L. (4th) 50; Greenberg v. Meffert (1985), 1985 CanLII 1975 (ON CA), 18 D.L.R. (4th) 548 (Ont. C.A.), at pp. 555-56, leave to appeal refused, [1985] 2 S.C.R. ix; and Chann v. RBC Dominion Securities Inc. (2004), 2004 CanLII 66310 (ON SC), 34 C.C.E.L. (3d) 244 (Ont. S.C.), at para. 48.
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