A. Introduction

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 780-784

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The general principles upon which terms can be held to be implicit in contracts have been considered in a previous chapter.¹Here we consider whether Canadian common law recognizes the existence of a general duty, perhaps in the form of an implied term, requiring contracting parties to perform their agreements in good faith. Civilian systems typically recognize the existence of a general duty of this kind. Indeed, the origins of the concept can be traced to Roman law.²English common law, on the other hand, has been resistant to the idea. In 1989, Bingham L.J. compared the English and civilian systems in the following terms:

In many civil law systems, and perhaps in most legal systems outside the common law world, the law of obligations recognises and enforces an overriding principle that in making and carrying out contracts parties should act in good faith. ... English law has, characteristically, committed itself to no such overriding principle but has developed piecemeal solutions in response to demonstrated problems of unfairness.³

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Although English interest in the civilian doctrine of good faith performance has been sharpened by the increasing influence of European law on the English law of contracts,⁴a general duty to perform contracts in good faith has not yet emerged in English law.

A very different story unfolded in the United States. The recognition of a general duty of good faith performance was given a substantial impetus in American law and, indeed, a statutory base, when such a duty was explicitly provided for in the Uniform Commercial Code,⁵a model law, in the 1950s. The Code, in turn, was enacted as state law across the country. There are several references to good faith in the Code.⁶In due course, the influence of the American Code and the vast body of case law on good faith that surrounded and, to some extent, preceded it led to the inclusion of an article on good faith in the Restatement of Contracts 2d,⁷published in 1981. Section 205 of the Restatement provides as follows: "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Alone among the common law jurisdictions, then, the United States appears to have adopted a generalized duty of good faith contractual performance.

The interest of Canadian common law lawyers in the duty of good faith appears to have been stimulated, in part at least, by the work of the Ontario Law Reform Commission on sale of goods law⁸and contract law.⁹In its reports on both topics, the commission recommended that legislation be enacted giving recognition to the doctrine of good faith. In the latter report, the commission reasoned that "statutory recognition of the doctrine of good faith would serve to synthesize the various strands of good faith analysis in the case law. Moreover, the literature reveals that a generalized doctrine of good faith would conform

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to commercial realities."¹⁰To date, however, although some provinces have enacted legislation imposing good faith or fair dealing duties in the specific context of franchise agreements,¹¹neither Ontario nor any other common law province has enacted general legislation of the kind recommended by the commission. In recent years, however, Canadian...