Bhasin v Hrynew is a landmark decision by the Supreme Court of Canada. The Court has recognized a general principle of good faith contractual performance. Justice Cromwell, speaking for the unanimous Court, stated:
“[t]here is a general organizing principle of good faith that underlies many facets of contract law ... it is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle: a duty of honest performance, which requires parties to be honest with each other in relation to the performance of their contractual obligations.”
Justice Cromwell described the decision as an attempt to consolidate “piecemeal” conceptualizations of good faith dispersed throughout contract law. For instance, prior to Bhasin v Hrynew, it was already well-established that employment contracts were subject to the implied term of good faith, specifically in regards to the manner of dismissal. This principle was reinforced a few years ago by the Supreme Court of Canada in Honda Canada Inc. v Keays.
While having little impact on employees (who already owe a general duty of fidelity and honesty to their employers) Bhasin v Hrynew likely expands the obligation of fair and honest dealings for employers beyond the termination context. Employment law already offers fertile ground for employees seeking recourse against their employees so, from a practical perspective, the change in the law may be more academic than real. However, if ever an employer needed a reason to treat its employees with honesty and in good faith, the Supreme Court of Canada has just provided one.