Bhasin v Hrynew

Bhasin recognised good faith as an organising principle of Canadian contract law and identified the duty of honest performance — a contracting party may not lie or knowingly mislead the other about matters directly linked to performance.

Bhasin was an enrolment director for Can-Am, a registered education savings plan. Hrynew was a competitor. Can-Am decided to allow Hrynew to audit Bhasin's records as part of a restructuring. Bhasin lost his agency and customer base.

(1) Does Canadian contract law recognise a duty of good faith? (2) If so, was it breached?

Yes — duty of honest performance breached. Damages awarded.

Good faith contractual performance is an organising principle that underpins existing rules and supports the development of new ones. From it derives a free-standing duty of honest performance: a contracting party must not lie or knowingly mislead the other about matters directly linked to the performance of the contract. The duty cannot be excluded.

Cromwell J held that piecemeal Canadian doctrine on good faith had become incoherent. The new organising principle gives shape to existing duties (cooperation, exercise of discretionary powers, performance) and supplies a framework for incremental development. Honest performance is a minimum standard: not a fiduciary duty, not a duty of loyalty, but a duty not to lie about performance.

Reset Canadian contract law's treatment of good faith. Followed by CM Callow Inc v Zollinger (2020), which extended honesty to the exercise of contractual rights such as termination, and Wastech Services v Greater Vancouver Sewerage and Drainage District (2021), which addressed exercise of discretionary powers.

Bhasin v Hrynew, 2014 SCC 71, [2014] 3 SCR 494.

McLachlin CJ, LeBel J, Abella J, Rothstein J, Cromwell J, Karakatsanis J, Wagner J