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A SENSE OF YOUR DUTY

Needless to say, contracts are important documents in At trial, the condos argued that this was a case of simple
the commercial activities of a business – they provide contract interpretation – their actions fell within the
the necessary framework for the relationship between the confines of the contract which allows for termination on
parties as well as a set of roles and responsibilities. While 10 days’ notice. The trial judge, however, found the condo
the words written on paper are crucial to a well-functioning corps’ actions unsettling such that it constituted a breach
contract, it is not as widely understood that the conduct of their duty to act honestly in their contractual obligations
of the parties in the performance of that contract is as to the landscaper.
equally important.
The condo corps appealed the trial decision and were
Good faith contractual performance is a general organizing ultimately successful. The Ontario Court of Appeal
principle of the law of contract . In various situations and determined that the condo corps actions, although
1
types of relationships, the law recognizes the obligation unseemly, did not breach the termination provision nor
of good faith contractual performance. In other words, did they breach their duty of good faith. Rather, the condo
inherent to every contract is a party’s duty to act honestly corps availed themselves of a clause that the parties had
and honourably. agreed to at the time of signing the contract. In arriving
at this conclusion, the Court found that the duty of good
The above principles were tested in a recent case arising from faith simply means that parties must not lie or otherwise
a maintenance contract. A landscaping company provided knowingly mislead each other about matters directly linked
winter maintenance services to a number of condominium to the contract. This does not impose a duty of loyalty or
corporations . The two-year contracts included a termination of disclosure or require that a party forego advantages
2
clause, allowing for early termination on 10 days’ notice. flowing from the contract.
The condo corps had made the decision in spring of 2013
to terminate the contracts but purposely waited until after Many observers were pleased that the Court of Appeal held
summer maintenance services were provided (in September the line on the duty of good faith, thereby muting the dangers
2013) to give notice. During that summer, the landscaping of “ad hoc judicial moralism.” The Court emphasized the
company performed “freebie” work in hopes that it would need for commercial certainty in contractual relations.
act as an incentive for the condos to renew their contracts That said, given the inherently subjective analysis of what
when the terms expired. Condo representatives responsible constitutes good faith, it is important to be mindful of one’s
for handling the contracts were aware of these services and obligations and seek advice as necessary so as to avoid
knew that the company was under the impression that the any pit falls.
contracts were likely to be renewed.

1 Bhasin v. Hrynew, 2014 SCC 71, at para. 33.
2 CM Callow Inc. v. Zollinger, 2018 ONCA 896.

Emily Durst is an associate in Miller Thomson’s Kitchener-Waterloo office. She is
developing a broad practice in commercial litigation, insurance defence litigation and
alternative dispute resolution. Emily maintains a collaborative approach to the practice
of law while ensuring effective and client-focused advocacy.

Emily Durst
519.593.2395
edurst@millerthomson.com MILLERTHOMSON.COM

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