Honesty in Contracts: it's the Law in Canada now

Last week Thursday the Canadian Supreme Court released its decision on a case called Bhasin v. Hrynew.   This decision is an important decision in Canadian contract law: if your business uses contracts, this applies to you.

The Court found that there is a new duty of honesty in Canadian contract law.  The intention is to bring our contract law into line with the American laws as well as the Quebec Civil Code.

This new duty of honesty is a requirement that the parties do not lie or mislead each other about their contractual performance.   Each party is still allowed to negotiate and act in their own self-interest, however, if you lie about what you’re doing, you’re breaching your duty of honesty.

This duty of honesty is not a fiduciary duty, but it is getting close to it.

This decision can have huge consequences: businesses should sit down over the next few weeks with their lawyer to discuss any contracts they currently have concerns about.  Better to assess the risk head on instead of wait for a law suit.

Inga B. Andriessen JD