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CONTRACTING
IN GOOD FAITH
RECENT CASE LAW AT CANADA'S TOP COURT HAS CULTIVATED
A DUTY OF GOOD FAITH IN THE COMMON LAW OF CONTRACT,
AND LAWYERS SAY THE DOCTRINE IS OMNIPRESENT IN
INFRASTRUCTURE CONSTRUCTION DISPUTES
Feature
HISTORICALLY, WITH a couple of excep-
tions, there has not been a duty of good faith
in commercial relationships in Canada, says
Dentons partner Karen Martin. One excep-
tion is Quebec, which has the duty under its
civil code.
But in the last eight years, a trio of SCC
decisions has developed the common law
around how good-faith conduct operates in
commercial contracts, and lawyers say this
evolution is palpable in infrastructure and
construction disputes.
"It's a really hot topic right now in
construction and infrastructure," says
Martin, whose practice includes construc-
tion, infrastructure, and public-private part-
nerships. "Almost every project that has an
issue or dispute, the concept of good faith is
being put out there."
"ere are few claims that I see nowadays,
whether in arbitration or litigation, where
a claimant or plaintiff is not making that
allegation," says Jason Annibale, co-leader
of McMillan LLP's construction and infra-
structure group.
It began in 2014 with Bhasin v. Hrynew.
e dispute involved the non-renewal of a
contract between two parties in the educa-
tion-savings-plan industry. e plaintiff,
Bhasin, alleged that the respondents "improp-
erly and dishonestly" used the contractual
right of non-renewal to force Bhasin to
merge his business with his competitor and
claimed there was no "legitimate business
reason" not to renew the contract.
e main question before the court was
whether Canadian common law imposes a
duty on parties to perform their contractual
obligations honestly.
In Bhasin, the SCC said that the
common law's treatment of good-faith
performance in contracts was "piecemeal,
unsettled and unclear." Ruling in favour of
Bhasin, the court acknowledged that "good
faith contractual performance is a general
organizing principle of the common law
of contract." e court added that acting
honestly in the performance of contractual
obligations was a "further manifestation" of
that organizing principle.
