GOOD FAITH
FOR CONTRACTS
LEGAL DUTY
A NEW
FOR THE FIRST time in common-law Canada, the Supreme Court has recognized a
legal duty to perform contractual obligations honestly and with regard to the legitimate expecta-
tions of other parties.
e origin of that duty, the court stated in Bhasin v. Hrynew, could be found in a general
"organizing principle" of good-faith performance.
Alan Mark of Goodmans LLP in Toronto says that Bhasin is part of a continuing trend in
Canadian law.
"Courts have been moving away from rule-based analyses of contractual terms, rights and
breaches toward a contextual analysis," he says. "But a contextual analysis introduces uncertainty,
so that the courts have become a bit of a casino if you're looking to them to determine what
conduct would be sanctioned and how to advise clients."
Wendy Berman of Cassels Brock & Blackwell LLP in Toronto says that pre-Bhasin jurispru-
dence amounted to a "tangled mess" of case law.
"Sometimes there was a duty of good faith, sometimes there wasn't, sometimes it was implied,
sometimes it was statutory, sometimes it was a matter of contractual interpretation," she says. "But
in the end, you couldn't give the clients definitive advice on whether such a duty existed. Now at
least we know that all contracts are subject to a 'general organizing principle' of good faith."
To be sure, the Bhasin court described its ruling as an attempt to make Canadian contract law
more settled, fairer and more closely aligned with the reasonable expectations of the parties. But
the disparate and sometimes tortuous commentary that followed on the decision's release suggests
Canada's top court has enunciated
a new legal duty in contract negotiations.
Its effects are wide-ranging and controversial
BY JULIUS MELNITZER
10 | LEXPERT • December 2015 | www.lexpert.ca
PHOTO:
SHUTTERSTOCK
