The Supreme Court of Canada has made it clear: parties must perform their contractual obligations honestly. In Bhasin v. Hyrnew1the Court protected Mr. Bhasin ("Mr. B"). He was the little guy. He was a dealer for Canadian American Financial Corp. ("Can-Am"). Can-Am sells education savings plans ("ESPs") through people like Mr. B. Over the course of ten years Mr. B. built his sales force and became one of Can-Am's top enrollment directors. Mr. Hrynew ("Mr. H") also sold for Can-am and competed with Mr. B for sales of Can-Am ESPs.

Mr. H wanted Mr. B's sales and market. He tried to persuade Mr. B to merge with him and then to persuade Can-Am to make Mr. B merge. Mr. B refused the "hostile takeover" proposed by Mr. H. Can-Am was pressured by Mr. H and worried that its business might suffer without a merger. Can-Am lied to Mr. B so as to help advance Mr. H's merger plan. Ultimately, Can-Am terminated Mr. B as a dealer. Mr. B sued.

Mr. B won at trial. The judge found that Can-Am had acted dishonestly, misled Mr. B about the Mr. H merger plans, and did not tell him that Can-Am was working with Mr. H to make his the main agency in Alberta. The appellate court overturned the trial judge and the matter went to the Supreme Court.

The Court clarified the common law to make it "less piecemeal and unsettled, more coherent and more just." It stated that "good faith contractual performance is a general organizing principle of ...contract and that there is a common law duty applicable to "all contracts to act honestly in the performance of contractual obligations"2. That means that parties to a contract must perform their duties "honestly and reasonably and not capriciously or arbitrarily."3

The Court recognized that it was making new law: Mr. B's contract had an expiry date; in theory he had agreed that Can-Am could terminate his services. The Court said that parties could not "lie or knowingly mislead each other" about one's "contractual performance".4 Can-Am acted dishonestly when it refused to renew its agreement with Mr. B. Mr. H was held blameless.

Thirteen years later the little guy won. Mr. B was awarded $87,000.00, the value of his business at the time (2001), plus interest, and his costs throughout the litigation.

Thank you Mr. B. and his legal team: liars and cheaters have had their day.

Footnotes

1 2014 SCC 71

2 Supra, at para. 33

3 Supra, at para. 63

4 Supra, at para. 73

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