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Civil Litigation

SCC decision will likely impact scope of contract claims

The Supreme Court of Canada's recent decision in Bhasin v. Hrynew2014 SCC 71 (CanLII) – which established a general doctrine of good faith between parties and created a general duty of honesty in contractual performance – has the potential to widen the scope of contract claims, says Toronto civil litigator Adam Weissman.

In the unanimous decision, arising out of a contract terminated by one of the parties, Justice Thomas Cromwell writes, “In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just." Those two steps are acknowledging good faith contractual performance as a general organizing principle and recognizing the duty to act honestly in the performance of contractual obligations.

"It's interesting to see these developments because principles of good faith have been argued by lawyers for a long time and just flat out rejected in many contract instances," says Weissman, associate with Brauti Thorning Zibarras LLP. "The notion of 'good faith' is based in fairness and equity, but as stated it doesn't provide any clear remedies. It remains to be seen if we're just going to start getting mirror images of a lot of our existing tort claims and contract causes of action, only framed in the duty of good faith."

Now that the top court has created an organizing principle of good faith that exists in all contractual relationships, this has the potential to bring about quite a few changes, which Weissman says could include more claims being brought, as well as a widening of claims.

"I could see a lot of lawyers using this organizing principle to come up with duties they consider under the heading of good faith that probably wouldn't have been recognized before," he says. "Although, it's unclear what new duties would be recognized now."

Cromwell notes in his ruling, the application of the organizing principle of good faith "should be developed where the existing law is found to be wanting and where the development may occur incrementally in a way that is consistent with the structure of the common law of contract and gives due weight to the importance of private ordering and certainty in commercial affairs."

Weissman says the duty of honesty also has the potential to be used as a catch-all when trying to make misrepresentation claims that aren't very strong.

"For example, you might have a case where the factual underpinnings can't support a fraud claim, but there may have been a few dishonest comments made which now form the basis for an action under the duty of honesty," he says. "I have a feeling that's going to be thrown into a lot of contract claims in the future."



 

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