In its recent decision in
What you need to know
The Court held that the organizing principle of good faith
requires that, where a contract gives a party the ability to make a
discretionary decision, the
party must exercise that
discretion reasonably in light of the bargain the parties
made.
The Court held that the duty to exercise discretion reasonably
is imposed externally on the contractual relationship, and
therefore the parties cannot contract out of it.
This means that
The Court heard this case at the same time as
CM Callow Inc. v. Zollinger (CM
Callow), which considered the duty of honest performance.
The Supreme Court of Canada released its long-anticipated decision in Wastech Services Ltd v Greater Vancouver Sewerage and Drainage District today, a major decision concerning the scope of the.
not breached. The Greater Vancouver Sewerage and
Drainage District (
Metro ) and Wastech
Services Ltd. (
Wastech ) entered into a
long-term contract for the removal and transportation of waste to
three disposal sites. The contract gave Metro absolute
discretion to allocate waste between the sites and provided
that Wastech would be paid a different rate depending on the site.
In 2011, Metro reallocated waste in a way that resulted in
Wastech s not achieving a cost/revenue target identified in the
contract. The Court held that this reallocation did not breach
Metro s duty to exercise its contractual discretion in good
faith because it was consistent with the purposes for which the
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Despite the pandemic defining much of 2020, five key decisions
were released last year of lasting impact to businesses and
commercial dealings.
Expanding the Duty of Honest Performance
In
C.M. Callow Inc. v. Zollinger, 2020 SCC
45, the Supreme Court of Canada expanded the duty of
honest performance, holding that it requires that parties to a
contract must not lie or otherwise knowingly mislead each other
about matters directly linked to the performance of the contract.
This duty is breached where a right under a contract was exercised
Introduction
C.M. Callow Inc. v.
Zollinger
1
, the Supreme Court of Canada
(
SCC ) clarified the scope of the duty
of honest contractual performance, as recognized by the Court in
Bhasin v. Hrynew
Bhasin, and further expanded on in
C.M.
Callow, the duty of honest contractual performance is one of
the manifestations of the organizing principle of good faith in
performance of contracts. While the organizing principle of good
faith usually manifests itself in specific legal doctrines, such as
the doctrine of unconscionability, and in specific types of
contractual relationships, such as those where the parties are
required to cooperate to achieve the objectives of the contract and