On Friday, the Supreme Court of Canada released its long-awaited
decision in
C.M. Callow Inc. v.
Zollinger.
1 The decision provides a
significant elaboration of the scope and implications of the
doctrine of good faith in Canadian contract law from the
Court s landmark 2014 decision in
Bhasin v.
Hyrnew.
In 2014, the Supreme Court of Canada in
Bhasin v,
Hrynew recognized a general organizing principle
of good faith to address the types of situations and relationships
where the law requires honest, candid, forthright or reasonable
contractual performance.
3 The Court s decision,
however, left important questions about the scope of this
organizing principle and the particular duty of honest contractual
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Don t mislead your contracting counterparties about
matters linked to the performance of a contract. That is the
apparently simple message from the Supreme Court of Canada in
CM Callow Inc v Zollinger. Applying
the organizing principle of good faith and, specifically, the duty
of honest contractual performance (recognized in
Bhasin v Hrynew) to a case involving a right to
terminate an agreement on notice for convenience,
Callow
seeks to clarify the circumstances in which the duty of honest
performance may require a contracting party to provide information
The Supreme Court of Canada (
SCC )
recently released its much-anticipated decision in
C.M. Callow
Inc. v. Tammy Zollinger et. al ( C.M.
Callow ).
1 The decision
revisits the common law duty of honest contractual performance six
years after the SCC s seminal decision in
Bhasin v. Hrynew
(
Bhasin ).
2 The
C.M. Callow decision clarifies what constitutes a breach of the
duty of honesty in circumstances where one party does not correct
the other s mistaken belief pertaining to the agreement.
Background: Unanswered Questions following
The SCC s unanimous decision in
Bhasin described
good faith as a general organizing principle in the
Canadian common law of contracts that requires parties to perform
Bhasin”).
Many had hoped that the decision would shed light on the scope
of the duty of good faith and honest performance recognized in
Bhasin, and provide clear guidance to lower courts and
commercial parties on their contractual obligations.
However, the decision which resulted in a 5-3-1 split across the
court (Kasirer J writing for the majority, Brown J concurring, and
Côté J in dissent) may add further uncertainty to the
jurisprudence around obligations of good faith.
While the majority of the Court agreed that the respondent, a
group of condominium corporations known as Baycrest
(“Baycrest”), had breached its duty of honest