Important New Principles In Contractual Negotiations

In November 2014, the Supreme Court of Canada ("SCC" or the "Court"), in the case of Bhasin v Hrynew, recognized a new duty for contracting parties: the "honest performance" of contractual obligations. Pursuant to this new duty, "parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of a contract". Th e Court does not see this as imposing a positive duty of disclosure: it distinguishes between "active dishonesty", which is not permitted, and failure to disclose a material fact, which appears to be.

The SCC also recognized for the first time in Canadian common law that there is a "general organizing principle" of good faith contractual performance. Pursuant to this principle, "parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily".