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Friedmann Equity had asked the Supreme Court of Canada to abolish an old and rather technical "sealed contract rule" on several grounds including:

  1. internal inconsistencies in the rule;
  2. the rule lacks a principled justification;
  3. the rule is no longer applicable in some other jurisdictions;
  4. the rule has been strongly criticized by some courts and some academics;
  5. the rule is anachronistic; and
  6. the rule is anomalous.


  1. Should the "sealed contract" rule be abolished?


Appeal dismissed.


Bastarache, writing for the court, held that a proposed change in the common law must be necessary to keep the common law in step with the evolution of society, to clarify a legal principle or to resolve inconsistency. Any such change should be incremental and its consequences should be capable of assessment and that courts should not intervene if a change will have complex, uncertain and far-reaching effects. In the case at bar, he found no compelling reasons for the abolition of the sealed contract rule; the rule is consistent with commercial reality and with other rules that apply to sealed instruments, continues to serve a useful purpose in our law, and has not caused inconvenience in commercial transactions nor great hardship. To abolish it simply because the historical rationale for the rule is no longer important would necessarily call into question the validity of other rules that apply to sealed instruments and of other technical rules, both in the law of contract and in the law of property, which no longer appear to have any modern day rationale. The abolition of the sealed contract rule could also have far-reaching effects on existing contractual relationships. It would have the unfair result of creating uncertainty for those who had relied on the rule in executing their contracts.

Concluding, Bastarache held that to avoid uncertainty and any unfairness to those parties who have structured their commercial relationships in accordance with the sealed contract rule, any change to the law should operate prospectively and that only a legislature has the power to create a prospective change in the law.


  • Generally courts are hesistant to apply sweeping changes to the common law (judicial restraint) and prefer an incremental approach.
  • Only the legislature has the power to create a prospective change in the law..