Limitation Clauses and Good Faith: Ontario Court of Appeal Confirms Damages Can Be Capped – McMillan LLP
February 4, 2026
The Ontario Court of Appeal’s decision in 1401380 Ontario Limited (Wilderness North Air) v. Hydro One Remote Communities Inc. provides important guidance on the application of limitation of liability clauses in cases involving breaches of contractual good faith.[1] The Court confirmed that while parties cannot contract out of the duty of good faith altogether, they may limit the damages flowing from a breach of that duty through a clear and properly drafted limitation clause.
The decision offers a practical articulation of how limitation clauses should be interpreted in commercial contracts and clarifies their compatibility with the good faith doctrine developed in Bhasin v. Hrynew and subsequent cases.
