Since the Supreme Court of Canada's seminal decision, Bhasin v. Hrynew, 2014 SCC 71 [Bhasin], when the Court introduced the duty of honest performance in contract, gallons of ink have been spilled on the scope and nature of the duty, and both lawyers and courts have struggled to navigate the implications of this new doctrine.
One topic of controversy and confusion surrounding claims for breach of the duty of honest performance is their similarity to claims for tortious misrepresentation, and how to delineate the two. A potential resolution to this problem is to limit the temporal extent of the duty of honest performance, and recent decisions from the British Columbia and Alberta courts have adopted this approach.
The Origin of a Temporal Limit
The issue of whether there is a temporal limit to claims for breach of the duty of honest performance was addressed in part by Justice Brown in his concurring judgement in the Supreme Court of Canada's second decision on the duty of honest performance, C.M. Callow Inc. v. Zollinger, 2020 SCC 45 [Callow]. Justice Brown remarked that "the duty of honest performance is, after all, broadly comparable to the doctrine of fraudulent representation, although it applies (unlike misrepresentation) to representations made after contract formation."1
On a plain reading, Justice Brown's proposition appears to draw a temporal line. However, courts across Canada have been split on their interpretation of this comment. For example, in Basyal v Mac's Convenience Stores Inc., 2021 BCSC 1002, the BC Supreme Court declined to draw such a line, holding that Justice Brown was placing a temporal limit on fraudulent misrepresentation, but not on the duty of honest performance.2 In contrast, the courts in New Brunswick have set a firm temporal limit, holding that "the law does not recognize a pre-contractual duty to bargain in good faith."3
Clarification in British Columbia
In Medellin v Lucion, 2025 BCSC 180 [Medellin], a recent class certification decision where we were counsel for the Defendants, the BC Supreme Court considered whether representations made to potential clients of the defendant immigration consultant prior to them signing a written retainer agreement could ground a claim for breach of the duty of honest performance.
The Court found that representations made "at the time of contract formation" could not ground a claim for breach of the duty of honest performance, and in doing so, clarified the elements of such a claim.4 Relying on Bhasin and Callow, the Court held that the a plaintiff must establish the following:5
(a) the defendant made a false representation;
(b) the false representation was made knowingly or recklessly;
(c) the false representation was about matters directly linked to the performance of the contract;
(d) the false representation was made after contract formation;
(e) the defendant intended for the plaintiff to would act on the false representation; and
(f) the plaintiff relied upon the false representation and was induced into conduct as a result.
[Emphasis added]
The key addition to the test as detailed by the Court in Medellin is that "the false representation was made after contract formation."6 This requirement places a firm temporal limit on representations that can ground a claim for breach of the duty of good faith.
Subject to further clarification from the BC Court of Appeal, Medellin has placed a firm temporal limit on when representations can ground a claim for breach of the duty of honest performance, at least in British Columbia.
A Limit on Representations Made After Contract Completion in Alberta
In the Alberta Court of Appeal's recent decision Heritage Property Corporation v Triovest Inc, 2025 ABCA 64 [Heritage Property], the Court placed a further temporal limit on claims based on representations made after contract completion.
In Heritage Property, the appellants entered into an agreement to sell land in Calgary, Alberta to the respondents for development (the "Sale Agreement"). As part of the terms of the Sale Agreement, the respondent provided a letter stating that it did not object to rezoning of the land. There was no mention of a development permit.
After the Sale Agreement was completed and the rezoning was approved, the appellants applied to the City of Calgary for a development permit. The development permit was granted, but subsequently appealed by neighbouring land owners, including the respondents. The appeal was successful, the development permit revoked, and the appellants sued the respondents for breach of the duty of honest performance.
Both the trial court and court of appeal held that the duty of honest performance was not applicable because it does not extend to conduct after a contract was completed. The Court of Appeal found:
The duty of honest performance means that "parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance" of a contract: Bhasin v Hrynew, 2014 SCC 71 at para 73. The development permit application, which was submitted by the appellants after the [Sale Agreement] had been performed, was not a matter directly linked to the performance of that agreement [Emphasis added].
As a result of this finding, the appellant developer's claim was dismissed entirely, leaving them without a remedy.
Together, Medellin and Heritage Property frame the temporal extent to which representations can ground a claim for breach of the duty of honest performance. They must occur after contract formation but before contract completion.
A More Cautious Stance from the BC Court of Appeal
In Ocean Pacific Hotels Ltd. v Lee, 2025 BCCA 57 [Ocean Pacific], another class certification decision published just weeks after Medellin, the BC Court of Appeal found that the duty of honest performance "does not extend to dishonesty that was intended to influence the other party to enter the contract," but declined to answer the "pure temporal question" of whether pre-contractual conduct could ground a breach of the duty of honest performance claim.
The alleged misrepresentations at issue occurred during negotiations for new contracts of employment for hotel service workers during the COVID-19 Pandemic. The BC Supreme Court found that because the employees had an existing employment agreement with the hotel at the time of negotiations, the representations were made within an existing contractual relationship, and therefore, the breach of the duty of honest performance claim had some prospect of success.
On appeal, the employer argued that the employees could not rely on misrepresentations about the new contracts made during negotiations to ground a claim for breach of the duty of honest performance because they were made before contract formation.
The Court of Appeal considered cases from across Canada where other courts have set a firmer temporal limit on the duty, and found that:7
Despite the fact the SCC has not explicitly found there is no manifestation of good faith which could apply to pre-contractual negotiations, there is still a developing consensus, with which I agree, that a claim for breach of the duty of honest performance cannot be based on dishonest conduct connected to contract negotiations.
Nonetheless, the Court of Appeal did not go so far as to explicitly draw the temporal line that Justice Brown's concurring decision in Callow suggested, preferring to go with Justice Kasirer's reasons for the majority where he held that a claim for breach of the duty of honest performance "must be directly linked to the performance of the contract."8 Applying this principle, the Court held that the representations during negotiations could not be directly linked to the future contract.9
The Court of Appeal also considered the issue that there are existing causes of action for pre-contractual misrepresentations, namely, the torts of negligent and fraudulent misrepresentation.10 On this point, the Court held that allowing a party to rely on pre-contractual conduct would introduce an "unnecessary and potentially confusing overlap between the remedies in tort and contract."11
Key Takeaways
There are three key takeaways from these new authorities:
- In British Columbia, litigants armed with Medellin and Ocean Pacific have a strong basis in law to bar claims for breach of the duty of honest performance based on representations made prior to contract formation.
- While the BC courts have yet to rule on whether a claim for breach of the duty of honest performance can rest on conduct post contract completion, we consider the logic in Heritage Property persuasive and expect that other courts will follow this reasoning.
- Medellin, Heritage Property, and Ocean Pacific illustrate an ongoing trend where courts are restricting the duty of honest performance, and litigants should be cautious about using the doctrine as a catch-all for misconduct or misrepresentation in contractual disputes.
Navigating breach of contract claims where misrepresentation is at issue can be challenging, and parties who wish to avoid a disastrous result like the one in Heritage Property should consult experienced counsel to assist in untangling these legal issues and to ensure that arguments are properly framed.
FootnoteS
1 C.M. Callow Inc. v Zollinger, 2020 SCC 45 at para 131.
2 Basyal v Mac's Convenience Stores Inc., 2021 BCSC 1002 at para 55.
3 Algo Enterprises Ltd. v. Repap New Brunswick Inc., 2016 NBCA 35 at para 13.
4 Medellin at paras 75, 99.
5 Medellin at para 75.
6 Ibid.
7 Ocean Pacific at para 65.
8 Callow at para 51.
9 Ocean Pacific at para 70.
10 Ibid at para 66.
11 Ibid at para 72.
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