The Supreme Court of Canada has released a precedent-setting
judgment in the area of contract law. In Bhasin v. Hrynew, 2014 SCC 71, the Court
recognized for the first time that there is a general organizing
principle of good faith in the performance of contracts throughout
Canada. The appeal was successfully argued by Neil Finkelstein and
Brandon Kain of McCarthy Tétrault's Toronto litigation
The Bhasin case will now become very important for
Canadian businesses. All contracts throughout Canada are now
subject to the duty of, at a bare minimum, honest performance,
which the Court held cannot be excluded by the terms of an
agreement. Businesses will need to consider whether they are
discharging this duty when carrying out a contract. If a given
course of action could be construed as deceptive, businesses should
avoid pursuing it unless they are willing to assume the risk of
litigation. Businesses should also be aware that under the general
principle of good faith, new obligations beyond the duty of honest
performance could be recognized in the future.
In a unanimous judgment written by Justice Cromwell, the Court
held that good faith contractual performance is an overarching
organizing principle of the common law of contract that underpins
and informs the various rules in which the common law currently
recognizes obligations of good faith. The organizing principle
means that parties must perform their contractual duties honestly
and reasonably and not capriciously or arbitrarily, and they must
have appropriate regard to the legitimate contractual interests of
the contracting partner. Although the principle currently manifests
itself through existing doctrines under which the law requires
parties to be honest, candid and forthright or to deliver
reasonable contractual performance, the principle is not limited to
these doctrines, but can also apply to novel contexts in which it
is appropriate to develop the common law incrementally.
As a specific manifestation of this organizing principle of good
faith, the Court recognized a new common law duty that applies to
all contracts to act honestly in the performance of contractual
obligations. This duty of honest performance does not impose a duty
of loyalty or disclosure, but it prohibits parties from lying or
otherwise knowingly misleading each other about matters directly
linked to the performance of the contract. In Bhasin, the
corporate defendant was found to have breached the duty of honest
performance and was therefore held liable in damages to the
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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