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Contract - Duty of Good Faith - Nature. High Tower Homes Corporation v. Stevens
In High Tower Homes Corporation v. Stevens (Ont CA, 2014) the Court of Appeal held, while considering the recent Supreme Court of Canada case of Bhasin v Hrynew, that a duty of good faith need not - in the face of an entire agreement clause (ie. a clause that purported to exclude any terms other than those expressly set out in a written contract itself) - be implied as a contractual term. Rather it is "a general doctrine of contract law that operates irrespective of the intentions of the parties":[35] The issue in CivicLife was whether the contract included a duty of good faith performance. Weiler J.A., writing for the court, concluded that it did, using the device of an implied term. At para. 52, she held that the wording of the entire agreement clause did not preclude the implication of such a term because it was already part of the contract. She further held that even if the entire agreement clause precluded such an implication on its face, the court had the discretion not to enforce the clause when to do so would be unconscionable, unfair, unreasonable or otherwise contrary to public policy.
[36] In Bhasin v. Hrynwew, 2014 SCC 71 (CanLII), 27 B.L.R. (5th) 1 – a decision released after this appeal was argued and on which the parties subsequently made written submissions – Cromwell J., writing for a unanimous court, clarified that the duty of good faith should not be thought of as an implied term. He recognized a new duty of honest contractual performance as a general doctrine of contract law that operates irrespective of the intentions of the parties. As such, the parties cannot exclude it by an entire agreement clause: Bhasin, at para. 74.
[37] Seen in the light of Bhasin, CivicLife is about the importance of acting in good faith in contractual dealings, and not about the general ability to imply terms – whatever their nature – notwithstanding an entire agreement clause.
[38] Because he was of the view that the entire agreement clause precluded the Purchaser from asserting that there were implied terms as to the manner of giving of notice, the motion judge did not expressly address whether a term should be implied that notice waiving the conditions in favour of the Purchaser could be given by fax to the Vendor’s solicitor and by hand delivery to Blue Water.
[39] I would decline to imply such a term. As Cory J.A. (as he then was) held in G. Ford Homes Ltd. v. Draft Masonry (York) Co. (1983), 1983 CanLII 1719 (ON CA), 43 O.R. (2d) 401 (C.A.), at p. 403: “no term will be implied that is inconsistent with the contract.” As mentioned above, the Agreement expressly provided a way in which the Vendor could be served: personally. There was no indication that the Vendor was evading personal service of the notice, and the Purchaser made no effort to serve the Vendor personally. To imply other terms in relation to notice would run contrary to the express notice provisions in the Agreement. The device of implying contractual terms is to be used sparingly and with caution: John D. McCamus, The Law of Contracts, 2nd ed. (Toronto: Irwin Law, 2012) at p. 774. Finally, I agree with the Vendor that implying the terms sought by the Purchaser is not necessary to give business efficacy[3] to the Agreement. Therefore, these terms should not be implied as a matter of presumed intention.
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