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Contracts - Duty of Good Faith

Contracts - Duty of Honesty

Contracts - Waiver

Estoppel - Promissory

High Tower Homes Corporation v. Stevens (Ont CA, 2014)

In this Court of Appeal case the court discussed the recent Supreme Court of Canada case of Bhasin v Hrynew as to when the duties of good faith and honesty would be implied in a contract, particularly in the face of a 'whole agreement' clause in the contract (ie. a clause the purported to exclude any terms other than those expressly set out in a written contract itself):
[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.
The court also set out the legal test for the occurence of waiver:
[43] In Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597 (CanLII), 354 D.L.R. (4th) 516, at para. 63, Gillese J.A., writing for the court, summarized the essentials of waiver as set out by the Supreme Court of Canada in Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490:
Waiver occurs when one party to a contract (or proceeding) takes steps that amount to foregoing reliance on some known right or defect in the performance of the other party. It will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of the deficiency that might be relied on and (2) an unequivocal and conscious intention to abandon the right to rely on it. The intention to relinquish the right must be communicated. Communication can be formal or informal and it may be inferred from conduct. The overriding consideration in each case is whether one party communicated a clear intention to waive a right to the other party.
And the doctrine of promissory estoppel:
[57] The Supreme Court set out the principles of promissory estoppel in Maracle v. Travelers Indemnity Co. of Canada, 1991 CanLII 58 (SCC), [1991] 2 S.C.R. 50 at p. 57:
The principles of promissory estoppel are well settled. The party relying on the doctrine must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the representee must establish that, in reliance on the representation, he acted on it or in some way changed his position.
[58] The promise can be inferred from the circumstances, but must be unambiguous: see Engineered Homes Ltd. v. Mason, 1983 CanLII 142 (SCC), [1983] 1 S.C.R. 641.

[59] Promissory estoppel is equitable relief. Therefore, the party seeking to invoke it must show that its “past record in the transaction is clean”: see Toronto (City) v. Polai, 1969 CanLII 339 (ON CA), [1970] 1 O.R. 483 (C.A.), at pp. 493-494; see also Servello v. Servello, 2014 ONSC 5035 (CanLII), 245 A.C.W.S. (3d) 330, at paras. 107-108, 117.


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