The Supreme Court of Canada issued an interesting decision recently in the area of contract law. It began by stating: “Canadian common law in relation to good faith performance of contracts is piecemeal, unsettled and unclear.” Clearly, this was an unsatisfactory state of affairs that the Court was determined to remedy. It outlined two steps:
- Acknowledging that good faith in performing contracts is an overarching principle; and
- Recognizing that there is a common law duty to act honestly in performing contracts.
The Court fleshed out what this means. “This new duty of honest performance is a general doctrine of contract law that imposes as a contractual duty a minimum standard of honesty in contractual performance.” As an example the Court wrote: “…parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.”
Previously, the common law recognized a duty of honest performance in employment, franchise and insurance relationships. Now, honest performance is expected in all areas of contract law.
Bhasin v. Hrynew, 2014 SCC 71 (CanLII)
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