Bhasin v Hrynew - The New Duty of Good Faith in Contract

Abstract

Over the past number of years, the law surrounding the requirement to operate in good faith in conducting contractual obligations has been a developing principle in common law countries from Australia, to the United Kingdom to Canada. In Canada, this principle has developed separately within the civil and common law legal traditions respectively. While the Quebec Civil Code has historically provided for an expectation of parties to a contract to operate in good faith, the common law in Canada has not been as clear. Prior to 2014, the Canadian common law duty to negotiate in good faith was an unsettled body of law, recognized in certain areas, but not across the discipline as a whole. It has only been since the Supreme Court of Canada decision in Bhasin v. Hrynew that this duty to negotiate in good faith has been outlined as a coherent set of guiding principles. Parties to a contract are now both bound by a general organizing principle of good faith in contracts and are expected to act honestly in the performance of their contractual obligations. While new to the Canadian common law, numerous cases have been quick to test the court’s interpretation of this change in scope to the law of good faith. As Canadian common law jurisprudence moves forward, this principle will continue to expand and develop.