Case Summary: Bhasin v. Hrynew - Canadian Business Law Principles

This case summary analyzes Bhasin v. Hrynew, a significant Canadian legal case concerning the duty of good faith in contractual performance. The case involves Canadian American Financial System and two enrollment directors, highlighting the importance of honesty in business dealings. The court established a new common law duty of care, emphasizing that parties must act honestly when fulfilling contractual obligations, beyond the specific terms of the agreement. The summary covers the facts, issues, decision, and legal principles, including the distinction between good faith and honesty. The court found the company liable for misleading the plaintiff and breaching its duty of care. The case underscores the importance of good faith and honesty in contract law, which is a foundational principle for all contractual duties to ensure reasonable and trustworthy conduct. The document also provides a list of references to support the case analysis.

Running head: CASE SUMMARY
Bhasin v. Hrynew, 2014 SCC 71 (CanLII)
Name of the Student
Name of the University
Author’s Note

1CASE SUMMARY
Area of Law:
In 2014, the Court introduced a new Common Law Duty of care to the performance of
the contract by both the parties. This duty is in addition to all the other duties laid down in the
terms and conditions of the contract entered into by the respective parties. The duty of care is
interpreted from two aspects which are firstly, the general principles organizing the good faith
and secondly, the duty of honestly carrying out the contractual duties.
According to Styles v Alberta Investment Management Corporation, 2017 ABCA 1
[Styles] at para 50, the duty of care to honestly carry out the contractual duties does not extend to
the negotiation period. In Rolin Resources Inc v CB Supplies Ltd (2018), it was held that in a
land deal, the duty of honest care applies only after the contract is executed. However, the
situations of satisfaction and due diligence occur only after the contract is executed but not
closed. In case of disputes in land deals arises during due diligence process and in case of
discrepancies, the Court shall consider the intent of the seller whether it is to mislead the buyer
or not. In Macera v Abcon Media Canada Inc (2017), it was further clarified by the court that the
due diligence should be done by the buyer before entering into the deal. In case of concealment
of fact or any physical condition of the property, the seller cannot be held liable on the ground
that the burden of proof lies on the buyer to prove the intention of dishonesty from the part of the
seller.
Facts of the Case:
Canadian American Financial System markets education savings plans through agents
called the enrollment director and both the parties were the enrollment directors and competitors

2CASE SUMMARY
to each other’s job. However, the defendant was then appointed as the Provincial Trading Officer
wherein he was required to access the confidential documents of the company and audit the
enrollment directors accordingly. The plaintiff continuously refused to the positioning of his
competitor in such advantageous position. The company also had a clause where the contract
shall continue to renew every 3 years unless the party wishing to terminate the contract provides
a six months’ written notice to the company prior to the expiry of the contract. The Company
kept misleading the plaintiff that the information received by the defendant would be
confidential and secondly, the management has refused the appointment of an outsider as the
Trading Officer. However, at the end of the term, the plaintiff lost his job and had to settle with
the lower paying jobs with one of the Company’s competitors.
Issues Involved:
The issue involved in this case is that whether the Canadian common law impose a duty
on parties to perform their contractual obligations honestly.
The issue involved in this case is whether the Canadian American Financial System was
liable for the breach of duty of care to honestly discharge the contractual obligations by the
parties.
Decision:
The Court found that the Canadian American Financial System had a duty of care of trust
towards the plaintiff and misled him to the interest of his own as well as the interest to the
defendant’s role as the Trading officer.

3CASE SUMMARY
It was contended by the petitioner that the Company tried to mislead him resulting in the
termination of the job and hence the damages. However, the defendant contended that it was the
company that misled the plaintiff and not the Trading Officer therefore, the plaintiff’s petition to
suit against the Canadian American Financial System was accepted, but the Court dismissed the
petition appeal against Mr. Hrynew.
Duty to act in good faith and duty to act honestly are two sides of a coin. One cannot
exist without the other. The duty of a contract implies interest of a party and the consideration for
the other. In such situation, it is important for the party discharging the duty to cant in good faith
and also in full honesty to the other person to protect his interest arising from such contract.
However, the duty does not include any fiduciary duty. Nevertheless, the duty of good faith and
honesty is an underlying principle for all contractual duties to assess minimum standard of
reasonable honesty so that the contractual duty has been discharged with trust, and modesty of
the conscience which can only be ‘relaxed’ by the expressed terms of the contract. The term
‘relax’ however, does not evade the duty of care, but relaxes in the sense that the trust is pre-
established between the parties and the contractual duty shall be effectively discharged by the
party.
Conclusion:
It was held by the Court that the Canadian Common Law implies a duty of care of good
faith and honesty on the parties to discharge their contractual duties effectively.
It was held by the Court that Canadian American Financial Systems is liable for the
damages incurred by the plaintiff due to lack of duty of care of good faith and honesty and
misleading the plaintiff for its own interest.

4CASE SUMMARY

5CASE SUMMARY
References:
Bhasin v Hrynew, (2014, SCC 71)
Hall, G. R. (2015). Bhasin v. Hrynew: Towards an Organizing Principle of Good Faith in
Contract Law. Banking & Finance Law Review, 30(2), 335.
O'Byrne, S., & Cohen, R. (2015). The Contractual Principle of Good Faith and the Duty of
Honesty in Bhasin v. Hrynew. Alta. L. Rev., 53, 1.
Young, J. (2016). Justice Beneath the Palms: Bhasin v. Hrynew and the Role of Good Faith in
Canadian Contract Law. Sask. L. Rev., 79, 79.
Swan, A. (2017). GOOD FAITH IN CONTRACT PERFORMANCE: BHASIN V. HRYNEW
TWO YEARS ON.
Retrieved From https://www.canlii.org/en/ca/scc/doc/2014/2014scc71/2014scc71.html?
searchUrlHash=AAAAAQARaHJ5bmV3IGFuZCBiaGFzaW4AAAAAAQ&resultIndex
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Styles v Alberta Investment Management Corporation, 2017 ABCA 1 [Styles] at para 50
Rolin Resources Inc. v CB Supplies Ltd., 2018 BCSC 2018 (CanLII)
Macera v Abcon Media Canada Inc, 2017 CanLII 45939