COMMERCIAL TENANCIES - Lease

Law360 Canada (March 6, 2023, 8:33 AM EST) -- Appeal by Amacon Alaska Development Partnership (Amacon) from a summary trial decision finding that it breached its duty of honest performance to ARC Digital Canada Corp. (ARC) in an agreement to modify a lease. Amacon argued that the trial judge failed to apply ordinary principles of contract law, made several factual errors and erred in proceeding by way of summary trial. ARC was a tenant of a commercial premises under a lease. Amacon purchased the Premises that necessitated an early termination of the lease. The parties orally agreed to lease amendments. Amacon, through Baker, provided ARC with an unsigned Lease Modification Agreement (Agreement). It substituted a new termination date, deleted the option to renew, and provided for compensation to ARC from Amacon. ARC advised Amacon it would not sign until it had secured new premises. ARC forwarded to Amacon the signed Agreement on the same day it signed a lease for new premises. Amacon informed ARC it would not sign the Agreement. Amacon did not provide reasons for not signing. ARC commenced the action seeking a declaration of validity of the Agreement, declaration of breach, specific performance and damages for breach of contract. The New Termination Date passed, and ARC remained in occupation of the Premises with no indication from Amacon it agreed to be bound by the Agreement. In an unannounced reversal of its position, Amacon delivered to ARC the fully signed Agreement, a cheque for $290,000, and a letter stating the Agreement was binding on the parties and ARC was not entitled to the second payment, as it had not vacated the premises by the New Termination Date. Amacon claimed ARC was liable for double rent for the overholding period. ARC paid only the ordinary rent amount under the Lease and gave Amacon notice of its intention to vacate the Premises. Amacon advanced a counterclaim seeking double rent from ARC and legal fees on a full indemnity basis. The judge found Amacon was aware of ARC’s fundamental objective and requirements in terms of relocating its business operations. It found Amacon in breach of the Agreement and its duty of good faith in its performance of the Agreement. Amacon’s counterclaim was dismissed....
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