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  • Sea to Sky Law

New Business law decision

Updated: Aug 17, 2023

The Supreme Court of Canada 🇨🇦 issued an important decision for business law on 18 December 2020. In the decision C.M. Callow Inc. V. Zellweger, 2020 SCC 45, our highest court affirmed its 2014 decision that honesty is required in business.

Our SCC has held that the duty of honest performance applies to all contracts, as one of the different good faith duties which manifest the "organizing principal of good faith". This SCC decision affirmed that every Party to a contract must exercise their contractual rights and obligations honestly. A party to a contract does not have a duty to the other party - you are not a fiduciary nor do you need to be selfless but you cannot act capriciously nor arbitrarily. The bargain the Parties made is the source of fairness between the parties.

Everyone must exercise and perform their contractual rights and obligations honestly and reasonably. "The duty of honest performance is a contract law doctrine, not a tort...." The question is about the manner of performance, about whether a contractual right was performed dishonestly. In this case, a strata corporation had an undisputed, unilateral right to terminate a contract for snow removal with only 10 days notice. The wrong done was that the Strata Corporation made the termination decision early in the year but actively misled the Contractor until finally giving notice in September causing - with the late notice - a loss of opportunity to replace the work.

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