The duty of honest contractual performance is a contractual

duty A duty (from "due" meaning "that which is owing"; fro, deu, did, past participle of ''devoir''; la, debere, debitum, whence "debt") is a commitment or expectation to perform some action in general or if certain circumstances arise. A duty may ...

and

implied term A contractual term is "any provision forming part of a contract". Each term gives rise to a contractual obligation, the breach of which may give rise to litigation. Not all terms are stated expressly and some terms carry less legal gravity as th ...

of a

contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...

, introduced into

Canadian law The legal system of Canada is Legal pluralism, pluralist: its foundations lie in the English common law system (inherited from its period as a colony of the British Empire), the Napoleonic Code, French civil law system (inherited from its New Fra ...

in 2014 as a result of the decision of the

Supreme Court of Canada The Supreme Court of Canada (SCC; french: Cour suprême du Canada, CSC) is the Supreme court, highest court in the Court system of Canada, judicial system of Canada. It comprises List of Justices of the Supreme Court of Canada, nine justices, wh ...

in the case of

Bhasin v. Hrynew is a leading Canadian contract law case, concerning good faith as a basic organizing principle in contractual relations in Canada's common law jurisdictions. The case at hand Canadian American Financial Corp (now known as Heritage Education Fu ...

. As a sub-category of

good faith In human interactions, good faith ( la, bona fides) is a sincere intention to be fair, open, and honest, regardless of the outcome of the interaction. Some Latin phrases have lost their literal meaning over centuries, but that is not the case ...

and a duty arising at

common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipresen ...

, contracting parties have a duty to act honestly in the performance of their contractual obligations. The Court recognised, in passing this judgement, that a new common law duty was being created: :It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations. The Court further stated: :Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest,

incremental Increment or incremental may refer to: *Incrementalism, a theory (also used in politics as a synonym for gradualism) *Increment and decrement operators, the operators ++ and -- in computer programming *Incremental computing *Incremental backup, wh ...

step. This new duty of honest performance is a general doctrine of contract law that imposes as a contractual duty a minimum standard of honesty in contractual performance. It operates irrespective of the intentions of the parties, and is to this extent analogous to equitable doctrines which impose limits on the

freedom of contract Freedom of contract is the process in which individuals and groups form contracts without government restrictions. This is opposed to government regulations such as minimum-wage laws, competition laws, economic sanctions, restrictions on pri ...

, such as the doctrine of

unconscionability Unconscionability (sometimes known as unconscionable dealing/conduct in Australia) is a doctrine in contract law that describes terms that are so extremely unjust, or overwhelmingly one-sided in favor of the party who has the superior bargaining ...

. However, the precise content of honest performance will vary with context ... Parties may not contract out of this duty.Bull and Housser
Supreme Court of Canada, Bhasin v. Hyrnew
accessed 29 May 2015

References

{{reflist Canadian business law Contract_law