New Duty Of Honest Performance

Late last week, the Supreme Court of Canada ("SCC") released the decision of Bhasin v Hrynew. This decision is significant as the SCC has found a new common law duty that applies to all contracts - a duty of honest performance. This new common law duty requires all parties to be honest with each other in relation to the performance of their contractual obligations.

Bhasin v Hrynew marks the first time that the SCC has expanded the application of "good faith" to apply to all contracts. Although the concept of "good faith" as applied to contract law is not new, it is generally only applied in certain contractual situations or relationships such as:

• an employer's duty not to engage in conduct that is "unfair" or is in bad faith by being, for example, untruthful, misleading or unduly insensitive when dismissing an employee;