Foulds defeated Laakkonen again in the 1981 election, even though the NDP lost seats under the leadership of Michael Cassidy. The following year, he ran to succeed Cassidy as party leader in a leadership convention. He competed against front runner Bob Rae and left-wing candidate Richard Johnston. Foulds had the most experience and supported traditional party positions. However, neither he nor Johnston with his appeal to the left wing of the party could stop Rae's union backed bandwagon. He lost on the first ballot behind Rae (64.6%) and Johnston (24.4%) with 11.0% support.