Supreme Court of Canada endorses Good Faith and Honesty

The Supreme Court of Canada  changed every contract in Canada. Now, all contracts include:

1) an obligation of good faith contractual performance, and
2) a duty to act honestly in the performance of contractual obligations.

So, good faith and honesty are in, and absolute, sole, unfettered discretion is out. No one is allowed to act unreasonably or capriciously, anymore.

Parties no matter what they say in a contract, cannot eliminate these two NEW common law principles.

Previous to Bhasin v. Hrynew (2014), that was not the law, but it is now.

This will have an effect on real estate listing agreements, buyer representation agreements, agreements of purchase and sale (including the ancillary documents, being waivers, amendments and fulfillments). It will also effect every lease, every mortgage, every franchise agreement and every building contract.

It will probably take at least 20 years for lower Courts to interpret what the Supreme Court of Canada just did, when it changed 5,000 years of contract law.

This will be of dramatic consequence to the real estate industry. Real estate practitioners would be well-advised to seek the assistance of a lawyer in areas of uncertainty. Solicitors draft contracts, and we will likely need some new precedents. Barristers take matters to Court, and there should now be some interesting opportunities.

Brian Madigan LL.B., Broker

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