Data

Date:: 20-01-2018
Country:: Canada
Number:: 500-09-024690-141
Court:: Supreme Court of Canada
Parties:: Churchill Falls (Labrador) Corporation Ltd. c. Hydro-Québec

Keywords

LONG-TERM CONTRACTS - ENERGY SUPPLY CONTRACT - BETWEEN TWO CANADIAN COMPANIES - REFERENCE TO UNIDROIT PRINCIPLES TO INTERPRET AND SUPPLEMENT THE APPLICABLE DOMESTIC LAW (QUEBEC LAW)

CONTRAT D'ENERGIE - PRICE OF ELECTRICITY TO BE SUPPLIED FIXED FOR THE ENTIRE DURATION OF CONTRACT - SUPERVENING CHANGES ON ENERGY MARKET BENEFITING CUSTOMER - SUPPLIER INVOKING HARDSHIP - RIGHT TO ASK RENEGOTIATION DENIED - REFERENCE TO ARTICLES 6.2.2 OF UNIDROIT PRINCIPLES IN SUPPORT OF SOLUTION ADOPTED UNDER APPLICABLE DOMESTIC LAW

Abstract

Appellant, a Canadian corporation operating a hydroelectric power station, and Defendant, a public utility distributing electricity in Quebec, entered into a power contract (“the Contract”) by which the former undertook to sell the latter almost all the output of electricity of its power station at a fixed price for a period of 40 years renewable for other 25 years. The price was calculated according to a schedule which permitted Appellant to cover the costs it incurred for the construction of the power station; in turn Defendant, which had assisted Appellant in getting the necessary financing for the construction of the power station, by virtue of the fixed price avoided any risk of inflation.

Over the years, due to a number of supervening circumstances the market price of hydroelectric energy in Canada increased considerably, prompting Appellant to request Defendant to renegotiate the price as stipulated in the Contract so as to adapt it to the changed market price. Appellant based its request on the general principle of good faith as laid down in Article 6, 7 and 1375 of the new Civil Code of Quebec of 1994, which in its opinion justified a price revision so as to restore the original equilibrium of the Contract and to avoid that Defendant obtained an unjust profit. Defendant objected that the parties had concluded the Contract after lengthy negotiations and, although perfectly aware that the market price of hydroelectric energy was exposed to considerable fluctuations, had agreed on a fixed price for the whole duration of the Contract considering its amount a fair allocation of the risks either of them was taking.

Both the Court of first instance and the Court of Appeal (see Cour d'Appel, Province de Québec, District of Montreal of 08.08.2016, http://unilex.info/principles/case/1968) decided in favour of Defendant, pointing out that the principle of good faith as laid down in the Civil Code of Quebec concerned only the conduct of the parties in the course of performance of the contract, i.e. their duty to act in a honest and fair manner, and could not be invoked in support of a revision of the contract terms as originally agreed upon. By a majority decision the Supreme Court confirmed the decision of the Court Appeal. According to the dissenting opinion (per Rowe J), the Contract was a relational contract under which the parties had an implied obligation to cooperate establishing a mechanism for the allocation of the extraordinary profits it was generating for Defendant.

Fulltext

Churchill Falls (Labrador) Corp. (Appelant) v. Hydro-Québec (Defendant), 2018 SCC 46, [2018] 3 S.C.R. 101 (Excerpts from fulltext at https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/17338/index.do)

[….]
In 1969, the Churchill Falls (Labrador) Corporation Limited and Hydro Québec signed a contract that set out a legal and financial framework for the construction and operation of a hydroelectric plant on the Churchill River in Labrador. In the contract, Hydro-Québec undertook to purchase, over a 65-year period, most of the electricity produced by the plant, whether it needed it or not, which allowed Churchill Falls to use debt financing for the construction of the plant. In exchange, Hydro Québec obtained the right to purchase electricity at fixed prices for the entire term of the contract. After the contract was signed, there were changes in the electricity market, and the purchase price for electricity set in the contract is now well below market prices. Hydro Québec sells electricity from the plant to third parties at current prices, and this generates substantial profits for Hydro Québec. In the circumstances, Churchill Falls is asking the courts to order that the contract be renegotiated and that its benefits be reallocated. Churchill Falls seeks to have the fixed rate being paid by Hydro Québec replaced with a new rate so as to ensure that the contract reflects the equilibrium of the initial agreement and in order to enforce Hydro Québec’s alleged duty to cooperate with Churchill Falls on the basis of its general duty of good faith. The Quebec Superior Court concluded that the intervention sought by Churchill Falls was not warranted, and the Court of Appeal dismissed Churchill Falls’ appeal.
Held (Rowe J. dissenting): The appeal should be dismissed.
Per Abella, Moldaver, Karakatsanis, Wagner, Gascon, Côté and Brown JJ.: Given the nature of the contract and the duties of good faith and equity, Hydro Québec did not have a duty to renegotiate the contract when the contract proved to be an unanticipated source of substantial profits for it. In Quebec civil law, there is no legal basis for Churchill Falls’ claim. The Court cannot change the content of the contract, nor can it require the parties to renegotiate certain terms of the contract or to share the benefits otherwise than as provided for in the contract.
[…]
The contract cannot be characterized as a joint venture contract or a relational contract. A joint venture contract is formed where businesses choose to become partners and to cooperate in a project by each investing resources and by sharing any profits from the project. In this case, the evidence does not show that the parties intended to enter into a partnership or to jointly assume financial or logistical responsibility for the project beyond the simple cooperation required to perform their respective prestations. The parties’ relationship thus lacks the characteristics generally associated with the joint venture contract. As for the relational contract, it sets out the rules for a close cooperation that the parties wish to maintain over the long term and puts an emphasis on the parties’ relationship and on their ability to agree and cooperate. It does not define their respective prestations in much detail. As a result, it requires a cooperation that is, in the end, more active than the cooperation required by transaction based contracts. The parties’ contract sets out a series of defined and detailed prestations as opposed to providing for flexible economic coordination. Each party’s participation is clearly quantified and defined, and no important prestations are left undefined. This shows that the parties intended the project to proceed according to the words of the contract, not on the basis of their ability to agree and cooperate from day to day to fill any gaps in the contract. The long term, interdependent nature of the contract does not in itself imply that the contract is relational.
[…]
The doctrine of unforeseeability cannot serve as a basis for requiring Hydro Québec to renegotiate the contract. This doctrine is a private law rule that is recognized in some civil law jurisdictions and the effect of which is that parties can be required to renegotiate a contract if, as a result of unforeseen events, performance of the obligations stipulated in the contract would be excessively onerous for one of them. […] But this doctrine is not recognized in Quebec civil law at this time. Any development of concepts analogous to unforeseeability in Quebec civil law must take account of the legislature’s choice not to turn this doctrine into a universal rule. Furthermore, even in jurisdictions where the doctrine of unforeseeability is recognized, it applies only in narrow circumstances that quite simply do not correspond to those of the parties in this case. The parties intentionally allocated the risk of electricity price fluctuations to Hydro Québec, and the changes in the market did not have the effect of increasing the cost of performing Churchill Falls’ prestations or diminishing the value of the prestations it received from Hydro Québec. On the contrary, Churchill Falls has continued to receive exactly what it was owed under the contract, as well as the related benefits.
The principles of good faith and equity do not impose a duty to renegotiate on Hydro Québec. The introduction of the duty of good faith into the Civil Code of Québec shows that the legislature intended to temper the principles of the binding force of contracts and autonomy of the will of the parties. Good faith confers a broad, flexible power to create law and serves as a basis for courts to intervene and to impose on contracting parties obligations based on a notion of contractual fairness. It also serves to protect the equilibrium of a contract. However, it cannot be used to violate that equilibrium and impose a new bargain on the parties to the contract.
[…]
As to equity, it cannot be relied on in support of the relief being sought, since its effect would then be to indirectly introduce either lesion or unforeseeability into Quebec law in every case. To hold that a change in the circumstances of the parties to a contract will always justify its being renegotiated in the name of equity would conflict sharply with the legislature’s intent. Equity is not so malleable that it can be detached from the will of the parties and their common intention. Nothing about the relationship between Churchill Falls and Hydro Québec would justify such an intervention in the circumstances of this case. There is neither inequality nor vulnerability in their relationship. Both parties to the contract were experienced, and they negotiated its clauses at length.
The relief being sought cannot be granted. There is no legal basis on which a judge could impose a new bargain on Hydro Québec to which it has not agreed. Allowing a contract to be modified by a judge at the request of a single party would conflict seriously with the principles of the binding force of contracts and freedom of contract that underlie Quebec civil law. […]
Per Rowe J. (dissenting): Properly characterized, the contract binding Churchill Falls and Hydro-Québec is relational in nature and both parties are subject to a duty of cooperation. Hydro Québec breached this duty. Accordingly, the appeal should be allowed.
[….]
Relational contracts typically require successive performance, whereby the parties have obligations to perform on a continuing basis. This category of contracts should not be limited to those that leave certain obligations to be defined by the parties at a later date. Rather than being a necessary condition, undefined obligations are but one indicator of relational contracts. Other indicators include the duration of the contract and the creation of an ongoing economic relationship rather than a one-off transaction. In this case, the contract at issue is not a simple contract of sale. It establishes a cooperative relationship between the parties and it is the framework for an interdependent and long-term relationship. This conclusion is reinforced by its language. First, the agreement makes clear that both parties saw the project as requiring ongoing interaction and collaboration. Second, the parties committed to offering each other assistance during the execution of the contract in order to ensure its success. Third, the parties explicitly contemplated the need for consultation, joint determination, discussion, and revision. When considering the overall framework of the parties’ rights and obligations, the true nature of the contract becomes apparent: it is relational.
[…]
Based on the relational nature of the contract at issue and how it informs the requirements of good faith and equity, the parties had an implied obligation to cooperate in establishing a mechanism for the allocation of extraordinary profits. This obligation flows from the fact that a profit imbalance of this nature and magnitude is beyond what the parties intended when they concluded the agreement. The parties’ choice not to include a price adjustment mechanism was premised on shared assumptions about the nature and value of hydroelectric power at the time of the formation of the contract. It cannot be seen as excluding an obligation to cooperate should these shared assumptions no longer reflect reality. As the contract contains no mechanism for the allocation of profits that are beyond what was envisioned, the parties have an implied obligation to cooperate in defining the terms of their allocation. Hydro Québec has breached this duty by refusing to establish a price adjustment formula for these extraordinary profits by way of mutual agreement. Hydro Québec must therefore be held to its obligation, and should be ordered to cooperate with Churchill Falls for this purpose.
[…]
V. Analysis
[…]
(2) Unforeseeability and Good Faith
[83] As for the legal analysis, independently of the lack of any factual basis for a duty to renegotiate the Power Contract or to redefine how the benefits each party derives from it are shared, CFLCo argues that Hydro Québec is in any event legally required to renegotiate the Contract. According to this argument, Hydro-Québec’s duty to do so is rooted in the concepts of good faith and equity, which, in Quebec civil law, condition the exercise of the rights created by any type of contract. These concepts thus prevent Hydro Québec from relying on the words of the Contract, because to do so in circumstances in which the Contract effectively provides for disproportionate prestations would be contrary to its duty to act in good faith and in accordance with equity. And given that the prestations owed by the parties have been disproportionate since the changes in the market occurred, Hydro Québec has been violating its duties related to good faith since then by refusing to renegotiate the Contract.
[84] In this regard, CFLCo insists that it is not pleading the doctrine of unforeseeability. But it is clear that CFLCo’s submissions in this Court closely resemble that doctrine and that they all echo its central theme: although the Contract was originally fair and reflected the parties’ intention, it no longer reflects that original intention and has not done so since major unforeseen changes occurred in the electricity market. This unexpected change in circumstances that disrupted the contractual equilibrium is central to CFLCo’s argument, no matter what form it takes. Yet a change in circumstances that disrupts the contractual equilibrium is precisely what would justify requiring the renegotiation of a contract if the doctrine of unforeseeability were applied.
[….]
(a) Doctrine of Unforeseeability
[86] The doctrine of unforeseeability is a private law rule that is recognized in some civil law jurisdictions and the effect of which is that parties can be required to renegotiate a contract if, as a result of unforeseen events, performance of the obligations stipulated in the contract would be excessively onerous for one of them. This rule has been adopted in the domestic law of several European civilian countries, recently including France. On the face of it, the rule corresponds to a key aspect of CFLCo’s concerns, as it applies specifically in situations in which changes that are beyond the control of and unforeseen by the contracting partners result in a significant disequilibrium in their respective prestations. This rule thus tempers the principle of the binding force of contracts where changes in market conditions alter the nature of a contract.
[87] The French legislature’s choice in 2016 to include the doctrine of unforeseeability in French civil law provides one example of this. In the new art. 1195 of the French Code civil, it has adopted the rule that flows from that doctrine in the following words:
“[translation] If a change of circumstances that was unforeseeable at the time of the conclusion of the contract renders performance excessively onerous for a party who had not accepted the risk of such a change, that party may ask the other contracting party to renegotiate the contract. The first party must continue to perform his obligations during renegotiation.
In the case of refusal or the failure of renegotiations, the parties may agree to terminate the contract from the date and on the conditions which they determine, or by a common agreement ask the court to set about its adaptation. In the absence of an agreement within a reasonable time, the court may, on the request of a party, revise the contract or put an end to it, from a date and subject to such conditions as it shall determine.”
[88] The doctrine of unforeseeability is also included in the Unidroit Principles of International Commercial Contracts (4th ed. 2016), a set of contract law rules published by the International Institute for the Unification of Private Law[…] The Unidroit Principles, which were developed by jurists from a number of countries for the purpose of creating a truly international body of law, are not binding. However, their drafters invite parties to a contract to designate these principles as the rules that will govern their agreement, and hope that they will influence national lawmakers in their legislative choices: P. A. Crépeau, with É. M. Charpentier, The Unidroit Principles and the Civil Code of Québec: Shared Values? (1998), at p. xxix; Charpentier, at pp. 21-22.
Article 6.2.1 of the Unidroit Principles states the principle that contracts are binding absent an unforeseeable event. In it, the concept of unforeseeability is referred to using the word “hardship”, which is defined as follows in art. 6.2.2:
“There is hardship where the occurrence of events fundamentally alters the equilibrium of the contract either because the cost of a party’s performance has increased or because the value of the performance a party receives has diminished, and
(a) the events occur or become known to the disadvantaged party after the conclusion of the contract;
(b) the events could not reasonably have been taken into account by the disadvantaged party at the time of the conclusion of the contract;
(c) the events are beyond the control of the disadvantaged party; and
(d) the risk of the events was not assumed by the disadvantaged party.”
[89] As is clear from the words of these provisions, this rule is subject to two core conditions in particular. First, unforeseeability cannot be relied on where it is clear that the party who was disadvantaged by the change in circumstances had accepted the risk that such changes would occur. Second, it applies only where the new situation makes the contract less beneficial for one of the parties, and not simply more beneficial for the other. It does not apply where the parties receive the prestations and benefits that are provided for or are allocated to them in the contract.
[…]
[91] Furthermore, under the French Code civil, for example, the performance of a contract must become not merely less beneficial, but [translation] “excessively onerous”. The term “hardship” favoured by the drafters of the Unidroit Principles clearly illustrates the nature of this requirement. Quebec authors who have written on this topic have had no hesitation in referring to a requirement of [translation] “true financial peril”: M. A. Grégoire, Liberté, responsabilité et utilité: la bonne foi comme instrument de justice (2010), at p. 237; see also Rolland (1999), at p. 937. Baudouin, Jobin and Vézina are of the view that if the courts had the power to intervene in cases of unforeseeability, they should do so only to [translation] “avert the ruin of a party”: No. 446.
[92] In the instant case, however, the evocation of this doctrine comes up against obstacles that are fatal to CFLCo’s argument. First, and fundamentally, the doctrine of unforeseeability is not recognized in Quebec civil law at this time. Second, even in jurisdictions where the doctrine is recognized, it applies only in narrow circumstances that quite simply do not correspond to those of CFLCo.
(b) Unforeseeability in Quebec Civil Law
[93] In Quebec, the commentators are unanimous. Quebec civil law does not recognize the general doctrine of unforeseeability: Baudouin, Jobin and Vézina, at No. 445; Lluelles and Moore, at Nos. 2231 and 2233; Pineau, Burman and Gaudet, at No. 285; V. Karim, Les obligations (4th ed. 2015), vol. 1, at paras. 3266-67; M. Tancelin, Des obligations en droit mixte du Québec (7th ed. 2009), at No. 352. The reason for this is simple. The legislature made a conscious choice not to include it in our law. The Code contains no article providing for such a rule. Nor was there any provision to that effect in the Civil Code of Lower Canada, the predecessor of the Code.
[94] As the Court of Appeal noted, the Civil Code Revision Office had initially suggested in its draft of the new code that judges be given the power to review contracts for unforeseeability: Civil Code Revision Office, Report on the Québec Civil Code (1978), Draft Civil Code, vol. I, at p. 343, and Commentaries, vol. II, at p. 614. The proposed new article would have changed the law, as the courts at the time had not developed this doctrine in the absence of legislation providing for it: Lluelles and Moore, at No. 2232. The Civil Code Revision Office explained that the draft article on unforeseeability and two others on lesion would in combination protect any party to a contract in the name of justice and equity: Commentaries, vol. II, at p. 614.
[95] However, the suggestion of the Civil Code Revision Office was not accepted: Crépeau and Charpentier, at pp. 33 and 35. As was explained in the National Assembly shortly before the enactment of the new Code, the provisions of Book Five that were included in the final draft were intended [translation] “to achieve a better balance between the parties to contractual relationships by promoting greater fairness but also by preserving the stability of such relationships”: La réforme du Code civil: Quelques éléments du projet de loi 125 présenté à l’Assemblée nationale le 18 décembre 1990 (1991), at p. 16. The articles on unforeseeability and lesion that were originally contemplated were no doubt incompatible with the concern to preserve contractual stability, especially given that, in addition, the new Code assigned a sensitive and essential role to the concepts of good faith and equity, including in contractual matters.
[96] As a result, the Code contains no rule on unforeseeability as that concept is understood and recognized in civil law jurisdictions elsewhere in the world. That being the case, the Quebec courts have been reluctant to develop their own law on unforeseeability. This is explained by, among other things, the political and social nature of the considerations underlying the choice to incorporate into the general law a rule that requires the renegotiation of a contract following an unforeseeable event.
[97] In this regard, I note that in a report on the general reform of the civil law of contracts, the French Ministère de la Justice notes that the doctrine of unforeseeability was adopted to address social policy considerations: Rapport au Président de la République relatif à l’ordonnance no 2016 131 du 10 février 2016 portant réforme du droit des contrats, du régime général et de la preuve des obligations, February 11, 2016 (online), Chapter IV, Section 1, Subsection 1. Moreover, several of the European countries that have adopted the doctrine of unforeseeability have done so in response to major political or economic crises: J. M. Perillo, “Force Majeure and Hardship Under the Unidroit Principles of International Commercial Contracts” (1997), 5 Tul. J. Int’l & Comp. L. 5; S. Litvinoff, “Force Majeure, Failure of Cause and Théorie De L’Imprévision: Louisiana Law and Beyond” (1985), 46 La. L. Rev. 1. Thus, it can be seen that a decision to subordinate one or more contractual relationships to the doctrine of unforeseeability usually depends on the express will of parties who choose to be governed by, for example, the Unidroit Principles, or on the will of national governments or legislatures that require it.
[…]
VI. Conclusion
[136] In the final analysis, CFLCo has not provided any compelling factual or legal basis for the courts to reshape the contractual relationship it has had with Hydro Québec for the last 50 years. The trial judge properly defined the nature of this relationship and the paradigm of the Contract, and also explained why Hydro Québec is not breaching its duty of good faith in exercising its right to purchase electricity from CFLCo at fixed prices. The parties never intended to allocate the project’s risks and benefits equally. On the contrary, the original intention was that Hydro Québec would assume most of the risks associated with the construction of a plant owned by another company. At the time the Contract was entered into, the benefit that CFLCo now characterizes as disproportionate, namely the guarantee of fixed prices for the purchase of electricity, was seen as a way to have Hydro Québec assume a risk that CFLCo did not want to assume. In return, Hydro Québec was to obtain low fixed prices and a long term contract, two benefits on which it insisted in 1969 in exchange for increasing its contribution to the project. It is true that it now, in good faith, earns substantial profits as a result. However, the magnitude of those profits does not justify modifying the Contract so as to deny it that benefit.
[137] The fact that the electricity market has changed significantly since the parties entered into the Contract does not on its own justify disregarding the terms of the Contract and its nature. While it is true that the introduction of the duty of good faith into the Code shows that the legislature intended to temper the principles of the binding force of contracts and autonomy of the will, this does not justify making inordinate use of that duty in order to override the terms of an agreement that adequately reflects the initial equilibrium envisaged by the parties. In reality, CFLCo is not asking the Court to help it give the Contract the broadest scope possible; rather, it is asking the Court to limit the Contract’s temporal scope so that it can more quickly enjoy the benefits it will eventually receive at the end of the Contract in 2041. Those benefits, which will in fact fall to CFLCo as a result of the paradigm of the Contract, are substantial for it as well: a Plant estimated to be worth more than $20 billion that it will be able to operate for its own benefit, starting in September 2041, for another 118 years until its lease expires.
[138] When all is said and done, CFLCo is seeking not to protect the equilibrium of the Power Contract, but to replace the Contract with a new agreement by undoing certain aspects of the Contract while keeping the ones that suit it. CFLCo is thus asking for more than accommodations or compromise; it is asking its contracting partner to give up the benefits it obtained in exchange for the sacrifices it made during the first few years of the project, a situation from which CFLCo has been benefiting since 1969 and continues to benefit today. Neither good faith nor equity justifies granting these requests.
[139] I would dismiss the appeal with costs.

The following are the reasons delivered by
Rowe J. (dissenting) —
I. Introduction
[140] My reasons in this appeal and those of my colleague, Justice Gascon, present contrasting visions of how the jurisprudence regarding contract characterization has developed under Quebec law. My conclusion on the question of characterization leads me to a result different from that reached by Justice Gascon. I would allow the appeal.
[…]
[142] The main issue in this appeal is therefore whether the trial judge erred in his characterization of the contract binding CFLCo and Hydro-Québec. I would answer this question in the affirmative given the failure of the trial judge to characterize the contract as relational rather than transactional. The Power Contract establishes a long-term relationship between the parties premised on cooperation and the promise of mutual benefit. Rather than define the parties’ obligations in rigid detail, it assumes that the parties would work together to fulfill the aims of their contractual relationship. Properly characterized, it is the epitome of a relational contract.
[143] A number of conclusions follow from this correct characterization. The first is that, given the nature of their contractual relationship, both parties have implied obligations and are subject to a heightened duty of good faith and cooperation. This duty flows from the operation of arts. 6, 7 and 1375, as well as art. 1434 of the Civil Code of Québec (“C.C.Q.”). The second is that the contractual relationship between the parties includes an implied obligation to reach an agreement about the allocation of unforeseeable and extraordinary profits arising from the operation of the Power Contract. This in turn leads to the conclusion that Hydro-Québec, by unreasonably withholding its agreement to negotiate with CFLCo about the allocation of these profits, has been in continuous breach of this obligation. The appellant’s claim against Hydro-Québec consequently cannot be prescribed by the operation of art. 2925 of the C.C.Q.

II. Analysis
[…]
[145] In what follows, I set out my reasons for concluding that, properly characterized, the Power Contract binding the parties is relational in nature. Parties to a relational contract are typically presumed to have bound themselves to a higher standard of good faith. This allows the parties to rely on a heightened duty of cooperation in fulfilling the goals of their contractual relationship. As the Power Contract contains no mechanism for the allocation of profits that are beyond what was envisioned at the time of the agreement, the parties have an implied obligation to cooperate in defining the terms of their allocation. Hydro-Québec has breached this duty by refusing to establish by way of mutual agreement a price adjustment formula for these extraordinary profits.
[…]
B. The Relational Nature of the Power Contract
[154] The fundamental aim of the Power Contract — its raison d’être — is the long-term hydroelectric development of the Churchill River for the mutual benefit of the parties. In my view, the Power Contract creates obligations that go beyond the mere exchange of financing and debt security for guaranteed power at a low price. Rather, it establishes a long-term cooperative relationship whereby both parties expected to gain. This relationship assumes a high degree of trust and collaboration between the parties. The Power Contract is, by its nature, a relational contract.
[155] In this case, the trial judge erred when he concluded that the clear language and binding force of the Power Contract as negotiated between the parties by their own free will did not support the conclusion that the parties had entered into an agreement of a relational nature (para. 553). Similarly, the Court of Appeal held that the Power Contract had no “relational element” that would justify heightened duties of collaboration. The rationale for this conclusion was that the parties were sophisticated, the negotiations lengthy, the financial implications significant, and the contract complex (2016 QCCA 1229, at para. 140 (CanLII)).
[156] My colleague adopts this view of the Power Contract and concludes that it is not relational in nature, in that it regulates all the obligations of the parties with precision (para. 69). According to Justice Gascon, none of the obligations in the Power Contract were left undefined. This indicates the parties’ intention that the project proceed according to the explicit terms of the Power Contract, and not according to their ability and, indeed, obligation to agree and cooperate to deal with contractual gaps (paras. 69-71). This implies that my colleague characterizes the contract as transactional, rather than relational.
[157] My view is premised on a different understanding of the nature of contractual relationships. On one hand, transactional contracts — i.e. generally contracts of instantaneous execution — do not create a relationship between the parties in any meaningful sense. They impose precise obligations to be performed at a specified time without the need for further cooperation (Baudouin, Jobin and Vézina, at No. 76). Relational contracts, on the other hand, typically require successive performance, whereby the parties have obligations to perform on a continuing basis (ibid.). This presupposes the existence of a deeper relationship based on trust between the parties and requires that each party have an interest in maintaining the relationship for the long term.
[158] With respect, I do not share the view that relational contracts should be limited to those that leave certain obligations to be defined by the parties at a later date. Rather than being the necessary condition of relational contracts, undefined obligations are but one indicator of a broader category of relational contracts. Other indicators include the duration of the contract and the creation of an ongoing economic relationship rather than a one-off transaction (Baudouin, Jobin and Vézina, No. 78).
[159] In this case, the Power Contract establishes a cooperative relationship between the parties for a period of 65 years. Unlike many energy arrangements, the Power Contract is not limited to a simple contract of sale between an electricity generator and a power purchaser. It is the framework for an interdependent and long-term relationship between the parties. […]
[160] This conclusion is reinforced by the language of the Power Contract (reproduced in A.R., vol. III, at pp. 461-519). First, its terms show that the enduring operation and continued success of the project was of cardinal importance to both parties. To this end, they bound themselves to take an active hand in the arrangement throughout the course of its operation. Taken as a whole, the agreement makes clear that both parties saw the project as requiring ongoing interaction and collaboration. This is reflected in the duty of full cooperation included in ss. 4.2.1, 4.3, 5.4, 20.3 and 21.1 of the Power Contract.
[…]
[163] Second, the parties committed to offering each other assistance during the execution of the contract in order to ensure its success. Such a commitment, in my view, is antithetical to the type of arm’s length dealing typical of transactional contracts. For example, the parties included an obligation to keep each other mutually informed of any changes in circumstances or of any progress under s. 5.1 of the Power Contract. In certain situations, they also provided for equal sharing of benefits, costs, and expenses over the life of the agreement (see, e.g., ss. 11.2, 13.3 and 14.1 of the Power Contract). In s. 11.2, for instance, the parties agreed that “[a]ll costs and any benefits of any refinancing of any of CFLCo’s Debt Obligations in respect of which Hydro-Quebec had been making interest charge payments under Article XV shall be shared equally by the parties hereto.”
[164] Third, the parties explicitly contemplated the need for consultation, joint determination, discussion, and revision in a number of instances (see e.g. ss. 4.5, 4.6, 6.7, 13.2 and 22.1 of the Power Contract). In s. 4.5, for example, the parties agreed that “[s]hould any meter . . . break down or be found not to have required accuracy, CFLCo and Hydro-Quebec shall determine . . . the amount of power and energy supplied during the period of failure or inaccuracy and the duration of such period.” Except in the case of appointment of independent auditors (s. 13.2), the parties did not provide for an alternative in the event they would fail to agree, which suggests that, in the vast majority of situations, they did not contemplate the possibility that a mutual agreement could not be reached. This reinforces the relational nature of their contract.
[165] Ultimately, even if we adopt the narrow view of relational contracts proposed by Justice Gascon, the contract at issue must still be characterized as relational. This is because the parties agreed to define the details of certain obligations relating to the execution of the contract at a later stage in their relationship. For instance, in the interest of overall system compatibility, the parties agreed that “[c]omponents of the Plant which may affect the economy or reliability of Hydro-Quebec’s transmission facilities shall have characteristics mutually agreed after joint consultation” (s. 4.1). The parties also agreed that they “shall, by mutual agreement, establish, revise and maintain up to date in the light of the experience gained in operating the Plant a detailed operating manual” (s. 4.2.8). Envisioning that there may be changes regarding the delivery dates, the parties stipulated that Delivery Dates may be advanced by mutual agreement (s. 6.3). They also provided that further adjustments to the Delivery Point may be made by mutual consent (s. 7.1). Regarding the refinancing of CFLCo’s Debt Obligations, the parties stipulated that revisions of existing Debt Obligation agreements shall be subject to the prior approval of both parties (s. 11.1).
[166] I add that none of the factors identified by the Court of Appeal — the sophistication of the parties, the length of negotiations, the financial implications, and the complexity of the contract — compromise the characterization of the contract as relational. Emblematic relational contracts such as joint ventures, partnerships, and franchise agreements are often complex and they are entered into by sophisticated parties after lengthy negotiations (J.-G. Belley, “Théories et pratiques du contrat relationnel: les obligations de collaboration et d’harmonisation normative”, in Meredith Lectures 1998-1999, The Continued Relevance of the Law of Obligations: retour aux sources (2000), 137, at pp. 139-40).
[167] In the end, it is only when one considers the overall framework of the parties’ rights and obligations set out in the terms of the Power Contract that the true nature of the arrangement becomes apparent. In my view, the true nature of the Power Contract is relational rather than transactional. I would consequently correct the conclusion of the trial judge on this issue.
C. The Implications of Proper Characterization
[168] The characterization of a contract determines the juridical category into which it falls and the legal consequences that attach to it as a result (Lluelles and Moore, at No. 1729). Depending on how it is characterized, a contract may contain certain implied obligations.
[…]
[173] In relational contracts, both good faith — as required by arts. 6, 7 and 1375 of the C.C.Q. — and equity provide guidance to defining the scope and content of implied obligations. In my analysis of the parties’ implied duty to cooperate, I consider how both grounds — good faith and equity — inform the scope and content of this obligation.
(1) Good Faith
[174] The requirement of good faith is a fundamental — and unavoidable — part of the civil law of Quebec. Its obligatory force is highlighted by art. 6 of the C.C.Q., which states that “[e]very person is bound to exercise his civil rights in accordance with the requirements of good faith.” In the context of the law of obligations, the requirement of good faith is reinforced by art. 1375, which states that “[t]he parties shall conduct themselves in good faith both at the time the obligation arises and at the time it is performed or extinguished.”
[175] The obligation to act in good faith implies an attitude that maximizes, for each party, the advantages of the contract (Lluelles and Moore, at No. 1978; see also Banque Toronto-Dominion v. Brunelle, 2014 QCCA 1584, at para. 94 (CanLII)). To uphold their duty of good faith, parties must act in a manner that respects the contractual balance established by their contract (Lluelles and Moore, at Nos. 1984-86).
[176] The practical requirements of good faith vary in intensity according to the nature of the contractual relationship at issue. In circumstances where the parties must work together to achieve the object of their agreement over a long period of time, the relational nature of the contract imposes a heightened duty of good faith on the parties (Dunkin’ Brands, at para. 71; see also Baudouin, Jobin and Vézina, at No. 162).
[177] This in turn entails a heightened duty of loyalty and cooperation to fulfill the obligations of the contract, whether they be explicit or implied. The duty of loyalty imposes a negative obligation to abstain from acting in a manner that would be disadvantageous to the other contracting party. The duty to cooperate, by contrast, imposes a positive obligation that requires proactive steps to accommodate the interests and fair expectations of the other contracting party […]
(2) Equity
[178] Courts have used equity as the basis for the obligations of good faith, loyalty, and collaboration in relational contracts (Pineau, Burman and Gaudet, at No. 235; Dunkin’ Brands, at para. 71). In my view, equity is broader than good faith and the duties of loyalty and collaboration under arts. 6, 7 and 1375 of the C.C.Q. It does not depend on the presumed intention of the parties; rather, it is premised on the law’s concern for fairness in contracts (Lluelles and Moore, at Nos. 1550-52; Dunkin’ Brands, at para. 71). While art. 1434 of the C.C.Q. does not allow courts to modify or revise contracts, it gives courts the power to enforce what appears to be equitable in a particular set of circumstances (Pineau, Burman and Gaudet, at No. 235).
[179] Equity is a means to remedy the imperfections of a contract so as to balance the interests of the parties (Lluelles and Moore, at No. 1550). It can be used to re-establish an equilibrium where the division of burdens and benefits issuing from the execution of the contract do not align with its intended scheme (Lluelles and Moore, at No. 1556; Miller v. Syndicat des copropriétaires de “Les résidences Sébastopole centre”, 1996 CanLII 4663 (Que. Sup. Ct.), at para. 19). It is a malleable concept that must be employed judiciously and with restraint. That said, equity is always relevant when considering contracts that involve a relationship of trust, such as the relational contract at issue (Lluelles and Moore, at No. 1553).
(3) Application
[180] Based on the relational nature of the agreement and how it informs the requirements of good faith and equity, I conclude that the parties had an implied obligation to cooperate in establishing a mechanism for the allocation of extraordinary profits under the Power Contract. This obligation flows not from the fact that any profit imbalance between the parties was unforeseen. Rather, it is premised on the fact that an imbalance of this nature and magnitude is beyond what the parties intended when they concluded their agreement. On this point, I agree with the appellant: energy was a public good with no real market value in 1969. It is for this reason that the pricing formula in the Power Contract was designed to reflect the declining costs of financing and operating the Churchill Falls project — and not to reflect the possibility of never-before-seen profits derived from the sale of surplus energy.
[…]
[182] The parties chose not to include a price adjustment mechanism in the Power Contract. This choice was premised on shared assumptions about the nature and value of hydroelectric power that prevailed in 1969. Given the relational nature of their contract, however, this choice cannot be seen as excluding an obligation to cooperate should these shared assumptions no longer reflect reality. In other words, the silence of the Power Contract regarding the allocation of extraordinary profits cannot be viewed as excluding the parties’ intention to define the parameters of their allocation at a later date. The parties cannot be expected to have included all possible scenarios in the Power Contract. The contractual framework established by the parties depends largely on their ongoing cooperation over a long period of time. This gives rise to their obligation to agree on how to allocate the extraordinary profits under the Power Contract.
[183] The binding force of contracts and the considerations of good faith and equity that inform the application of the Power Contract by virtue of its relational nature confirm that the respondent must be held to this obligation. Good faith and equity in these circumstances require that the parties cooperate in reaffirming the intended balance of their relationship. The recognition of this obligation does not amount to a revision, a modification, the imposition of an unintended equilibrium on the parties, or a forced renegotiation of the Power Contract. It simply recognizes the existence of an implied obligation to cooperate that arises from the relational nature of the Power Contract itself.

E. The Appropriate Remedy
[186] In light of my conclusion that the respondent breached its obligation to cooperate with the appellant in establishing a mechanism to allocate the unforeseeable profits generated by the Power Contract, I turn to the question of remedy.
[187] Specific performance is an available remedy for the breach of contractual obligations per art. 1590 of the C.C.Q. Given the nature of the parties in this appeal, the principle that no person may be forced to perform a specific act — nemo potest praecise cogi ad factum — does not apply. While judges should refrain from ordering specific performance of obligations that require the personal participation of the parties, the object of the obligation at issue and the nature and size of the parties that would be required to perform it may justify an order of specific performance (Lluelles and Moore, at Nos. 2887 and 2891). Such is the case here. As both parties are legal persons of considerable size and resources, there is no reason to conclude that the imposition of such an order would amount to an improper constraint on their capacity to act.
[188] I would consequently order Hydro-Québec to cooperate with CFLCo in establishing a price adjustment formula for the extraordinary profits that the Power Contract fails to allocate meaningfully. A court order for the parties to resolve an issue is uncommon, but not unknown (see White Birch Paper Holding Company (Arrangement relatif à), 2015 QCCS 701, at para. 53 (CanLII), leave to appeal refused, 2015 QCCA 752; Laberge v. Villeneuve, 2003 CanLII 16498 (Que. Sup. Ct.), at para. 65; Picard v. Picard, 2015 QCCS 5096, at para. 109 (CanLII)). In the absence of mutual agreement in the six months following this order, I would order that a price adjustment formula be established by a Justice of the Superior Court of Quebec upon submissions by the parties.
III. Conclusion
[…] I would allow the appeal with costs throughout.
Appeal dismissed with costs, Rowe J. dissenting.

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* McLachlin C.J. took no part in the judgment.}}

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