New Duty of Good Faith

AuthorEric Appleby
DateJanuary 02, 2015

How many times have you signed long documents which are required to complete a transaction and you did not read the terms. Such as, opening a bank account or signing loan documents. Reading and understanding such long documents is difficult and not feasible in many consumer transactions. Or while using a computer, have you recently clicked on “accepted” or “agree” in an internet transaction, again without reading the several pages of terms.

When you sign documents without reading the terms, can the terms be relied upon by a seller or provider to overcome deception or dishonesty by the seller or provider. Regardless of the terms, does a seller or provider have a duty to act honestly or to act in good faith?

Recently the Supreme Court of Canada said that such a seller or provider has a new duty to act honestly.

See Bhasin v. Hrynew et al., 2014 SCC 71.

In a unanimous decision the court held that a franchisor was liable in damages to Bhasin when the franchisor acted dishonestly, when the franchisor opted not to renew Bhasin’s contract to sell education savings plans. The contract allowed the franchisor to terminate the contract. The court stated that regardless of the contract terms “it is appropriate to recognize a new common law duty that applies to all contracts …. a duty of honest performance, which requires the parties to be honest with each other in relation to...

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