Bhasin sent shockwaves through the Canadian legal community, with lawyers and academics calling the decision ”groundbreaking” (Geoff R. Hall, Bhasin v. Hrynew: Towards an Organizing Principle of Good Faith in Contract Law, 30 Banking & Fin. L. Rev. 335, 335 (2015)), ”a milestone” (Brad Hanna & Calie Adamson, Let`s Be Honest: The New Duty of Good Faith in Contractual Performance, Mcmillan Litigation Bulletin, November 2014) and ”perhaps the most important contractual decision in the last 20 years” (David Dias, SCC establishes the duty of honesty between the parties, Legal Feeds, (November 13, 2014)). However, much of this frenzy was not positive. Three criticisms of this decision deserve special attention. The Court of Appeal reversed the decision, finding that the duty of good faith does not impose a duty of loyalty or disclosure or otherwise compel Baycrest to waive benefits under the contract. Importantly, the Court of Appeal concluded that any deception is not directly related to the performance of the contract, but to the renewal – a contract that does not yet exist READ: Supreme Trash Talk: The Duty of Good Faith in Contractual Discretion, clarified in Wastech. In this case, it is a snow removal contract in a group of condominiums. The housing companies (Baycrest) have entered into a contract with C.M.

Callow Inc. (Callow) for snow removal. In this case, there was no evidence that Metro had acted capriciously, arbitrarily or dishonestly. However, Metro was not required to act in a manner that subordinated its own interests to those of Wastech or gave Wastech an advantage for which Wastech had not negotiated. In dismissing the appeal, the court refused to grant Wastech ”a benefit not provided for in the agreement between the parties in the absence of a significant breach of contract or apparent injustice.” In fact, the right to perform a contract in good faith has evolved in a ”piecemeal” manner in which courts enforce a duty of good faith in various contractual contexts. For example, voting rights legislation imposes a legal obligation of good faith and fair trade. Insurers are required by law to treat their policyholders` claims fairly and in good faith; Similarly, policyholders are required to act in good faith by disclosing to their insurer all facts material to the insurance policy. The law requires good faith negotiations in the context of employment and termination of employment in good faith by employers. Good faith considerations also permeate doctrines that assess the fairness of contractual arrangements, such as lack of scruples and those that address power imbalances between the parties. [4] The court decision dealt with the organizational principle of good faith and the duty of honest performance. It was concluded that Baycrest had actively deceived Callow from the time of the termination decision until September 2013.

It was in bad faith to (i) withhold this information to ensure that Callow complied with Sommerwartung`s contract, and (ii) declare that the contract was not threatened with termination, even though it was known that Callow was taking work beyond the summary standby contract in order to increase the chances of extending the winter service contract (i.e. Callow tried to give Baycrest an incentive, extend the winter service contract). The court found that by unfairly exercising the termination clause, Baycrest breached the duty of honesty in a matter directly related to the performance of the contract, even if the 10-day notice period was met. Callow received damages to put her in the same situation as she would have been if the violation had not occurred. In Quebec civil law, by the combined effect of articles 6, 7 and 1375 of the Civil Code of Québec (”CCQ”), it has long been recognized that both the performance of the obligations of the parties and the exercise of their rights are part of the requirements of good faith. Therefore, under Quebec law, the abusive exercise of a contractual right, including an unrestricted right, constitutes a breach of contract. Unlike the common law, the duty to act in good faith is not a general principle in Quebec civil law, but a separate rule codified in the CCQ, regularly confirmed by the courts and enshrined in the civil law system. Therefore, its interpretation and application trigger a number of principles that are alien to the common law system. The measure of fairness is what is reasonable according to the agreement of the parties. This is not what a court considers to be fair in its own opinion of the proper exercise of discretion. Thus, if the exercise of discretion is outside the scope of the choices associated with the underlying objective – outside the objective for which the agreement concluded by the parties themselves provides for a margin of appreciation – it is contrary to the requirements of good faith.

The courts may intervene if the exercise of power is arbitrary or capricious in the light of its purpose as determined by the parties; However, their role is not to consider whether discretion has been exercised morally in a timely or commercially wise manner. Wastech involved a waste transport company (Wastech) and a company responsible for the disposal of municipal waste (Metro). In 1996, Wastech and Metro signed a waste management services contract that provided for the disposal of waste at three landfills, one of which was much further away than the others. The contract states that Metro had ”absolute discretion” in allocating the amount of waste to get to this more remote facility. The damages awarded were also remarkable. Compensation was calculated on the basis of the damage suffered as a result of the misleading information. If Baycrest had not misled Callow, the court held that Callow would have pursued other options that would have at least equalled the benefit of the terminated winter service contract. The damage was in line with Callow`s expected profit for the remainder of the winter service contract. This extent of the damage is significant given the 10-day notice period negotiated by the parties.

The approach of recognizing a comprehensive organizational principle but accepting the existing law as the main guide for future development is appropriate for the development of the doctrine of good faith. Good faith can be asserted in very different contexts, which requires a very context-specific understanding of what honesty and reasonableness of enforcement require to take due account of the legitimate interests of both parties. ”The Supreme Court recognizes that it has never clarified the standard of what good faith in the performance of the contract means,” he said. Recently, however, this resistance has begun to subside. In a frequently cited 2013 decision, Yam Seng Pte Ltd.c. International Trade Corp. Ltd., [2013] EWHC 111, the High Court of Justice of England and Wales faced legal litigation arising from a bitter distribution agreement. Essentially, one party argued that this was an implied clause in the contract that the parties would act in good faith and that the other party had breached that obligation. The court concluded that, although the Englishman`s hostility to good faith was both ”misplaced” and ”swimming against the tide”, English law was not yet ready to recognize an implicit general duty of good faith.

However, the court also noted that in some contracts, the relationship between the parties and the terms used in the agreement make it clear that the parties expect a basic level of honesty and cooperation. The Court considered that if this is clearly the intention of the parties – as in the agreement at issue – a good faith clause may be implied. More recently, in Bristol Groundschool Ltd.c. Intelligent Data Capture Ltd., [2014] EWHC 2145 (Ch.), the same court went further and concluded that all such ”relational” contracts must involve a bona fide disposition, whether or not the parties appear to have intended to do so. However, in limiting the scope of the duty of good faith, the Court held that the minimum standard of honesty was not to resolve the alleged performance issues and to notify the immediate notification of non-renewal outside of what was required under the contract […].