Canadian Lawyer InHouse

MAY 2015 14 INHOUSE Q U I Z Q U I Z ANSWERS YOUR RANKING? ■ One or Two correct: might be time to brush up ■ Three correct: not bad, but some further work needed ■ Four correct: very well done, but not perfect ■ Five correct: excellent 1 (B) No. The court declined to adopt a general duty of good faith in all contractual dealings. Instead, the court recognized a more narrow common law duty of honest contractual performance, which it explained to mean "simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract." However, Bhasin and the court's recent decision in Sattva Capital Corp v. Creston Moly Corp indicate that the court is prepared to introduce changes to long-standing principles of contract law and further changes in the future cannot be ruled out. 2 (B) No. Parties cannot contract out entirely of the duty of honest contractual performance. However, the court left open the possibility that parties can vary the "precise content of honest performance" in different contexts (presumably through drafting a contractual provision that establishes the standards the parties wish to live by). The court stated that modifi cations must be express, and that parties cannot contract out of the "minimum core requirements" of the duty. Since the parameters of the duty of honest performance, including its "minimum core requirements," are yet to be determined, it remains to be seen what modifi cations the courts will permit. 3 (B) No. The court was clear that the duty of honest performance is not a fi duciary duty. A contracting party is under no obligation to put the interests of a counter-party fi rst. However, at the very least, contracting parties should not engage in conduct that is actively misleading or otherwise deceitful. In defi ning the scope of the duty of honest performance, the court stated that it is similar to, but is not the same as or subsumed by, the law relating to civil fraud and estoppel. 4 (C) Maybe. The Supreme Court of Canada held that capricious and arbitrary behaviour was inconsistent with the duty of honest contractual performance. The landlord's abrupt change in position might seem that way to the counter-party faced with an unexpected non-renewal, even though in many cases, exercising a non- renewal clause will be neither dishonest nor unreasonable. For example, there may be a change in market conditions or the landlord may decide to sell some of its properties. To protect itself, the landlord may wish to consider documenting its internal decision-making process so that it can readily explain its motivations and behaviour. 5 (C) Maybe. While the duty of honest contractual performance does not impose a duty of disclosure on contracting parties, overly circumspect communications may give rise to allegations of dishonesty by omission. If parties are concerned about violating (or appearing to violate) a new duty of honesty in contractual performance with which they are unfamiliar, they may well be tempted to say less to each other in general. Allegations of "dishonesty by omission" could lead to litigation. This risk would be heightened in situations where one contractual party poses a direct question to another. GOVERNMENT/NON-PROFITS/ASSOCIATIONS CANADIAN LAWYERS AND JUDGES MAKING THEIR MARK CRIMINAL/HUMAN RIGHTS LAW THE WORLD STAGE CHANGEMAKERS THE WORLD STAGE MOST INFLUENTIAL TOP THE Au g u s t 2 0 1 4 PUBLICATIONS MAIL AGREEMENT # 40766500 $ 7 . 0 0 Who do you think are the most influential lawyers in Canada? Vote in Canadian Lawyer's TOP 25 MOST INFLUENTIAL LAWYERS IN CANADA poll. VOTING IS OPEN UNTIL JUNE 9 TH Visit WWW.CANADIANLAWYERMAG.COM for details CANADIAN LAWYERS AND JUDGES MAKING THEIR MAR AR AR AR AR AR ARK MA MAR AR AR ARK MOST MOST MOST OST MOST ST OST MO INFLUENTIAL VOTE NOW Top25_IH_May_15.indd 1 2015-04-10 1:11 PM

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