Thursday, 20 November 2014

Canada: contracts and the 'organising principle of good faith'

The Supreme Court gave judgment several days ago in Bhasin v Hrynew, 2014 SCC 71, one of the most important contract law cases of recent years and one that will be of interest internationally. Cromwell J delivered the judgment of the court and held that: [1] there was a general organising principle of good faith underlying many facets of contract law; and [2] it was appropriate to recognise a new common law duty, a manifestation of the general organising principle and applying to all contracts: a duty of honest performance, requiring the parties to be honest with each other in relation to the performance of their contractual obligations.

This new duty, Cromwell J stressed, was a simple requirement not to lie or mislead the other party about one's contractual performance. It did not impose a duty of loyalty or of disclosure, nor did it require one party to forego the advantages flowing from the contract.

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