If one party to a contract has the “facially unfettered right to terminate the contract”, must that party exercise its right to terminate the contract only in good faith?
In the case of Mohamed v. Information Systems Architects Inc., 2018 ONCA 428, Ontario’s top court answered that question with a “yes” – the unfettered right must be exercised in good faith.
“Does Canadian common law impose a duty on parties to perform their contractual obligations honestly?” That was the “key issue” that the Supreme Court of Canada sought to resolve in the case of Bhasin v. Hrynew, 2014 SCC 71 (CanLII), released November 13, 2014. Writing on behalf of the unanimous Court, the Honourable Justice Thomas Cromwell held:
I would answer [the question] in the affirmative. Finding that there is a duty to perform contracts honestly will make the law more certain, more just and more in tune with reasonable commercial expectations.
