Cromwell J. for a unanimous Supreme Court of Canada ruled in Bhasin v. Hrynew, 2014 SCC 71, that the “unsettled and unclear” role of good faith in the Canadian Common Law of contract required a fundamental restatement in order to bring it into line with other jurisdictions and the expectations of commercial parties. The relevant principles are set out as follows:
(1) There is a general organizing principle of good faith that underlies many facets of contract law.
(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.
(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.
The ruling was motivated by the court’s dissatisfaction with the “piecemeal solutions in response to demonstrated problems” that have characterized this topic until now.
