How companies are formed, governed, and held to account.
Canadian contract law recognises good faith as an organising principle, and imposes a duty of honest performance on every contract.
A corporation is a legal person distinct from its shareholders and directors; its rights, debts and liabilities are its own.
A person owes a duty to take reasonable care not to harm those they can reasonably foresee being affected by their conduct.
The Court recognised good faith as an organising principle of Canadian contract law and established a duty of honest performance: parties must not lie to, or knowingly mislead, one another about matters directly linked to the performance of the contract.
The Court clarified that directors' fiduciary duty runs to the corporation itself, not to any single group of stakeholders. In acting in the best interests of the corporation, directors may weigh the interests of shareholders, creditors, employees and others.
A consumer who fell ill after drinking ginger beer said to contain a decomposed snail could sue the manufacturer despite having no contract with it. The House of Lords recognised a general duty of care in negligence, framed by the 'neighbour principle': one must take reasonable care to avoid acts likely to injure those one can reasonably foresee being affected.
The House of Lords held that a properly incorporated company is a legal person separate from its shareholders, so the company's debts are its own. The foundation of separate corporate personality and limited liability.
Establishing the rule on remoteness of damages in contract, the court held that recoverable losses are those arising naturally from the breach, or those that were in the reasonable contemplation of both parties at the time the contract was made.