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What Is the Duty of Honest Performance in Canadian Law? A Guide for Workers, Employers, and Business Owners

Duty of Honest Perfromance

When people think of contracts, they often assume that once the terms are signed, the only obligations are those written on the page. But under Canadian law, there’s more to it. Since the Supreme Court of Canada’s landmark decision in Bhasin v. Hrynew (2014 SCC 71), every contract comes with a duty of honest performance—a legal requirement to act honestly when carrying out the contract.


What Is the Duty of Honest Performance?


The duty of honest performance means that parties must not lie or mislead each other about matters related to the performance of the contract. It applies to all contracts, including:


  • Employment agreements

  • Business partnerships

  • Service contracts

  • Leases and more


You are not required to be generous or disclose everything—but you must not deceive the other party about what you’re doing under the agreement.


This duty cannot be waived or excluded, even if the contract tries to do so.


Case Summary: Bhasin v. Hrynew, 2014 SCC 71


This case involved a business relationship between Mr. Bhasin, who sold education savings plans, and the company that managed his contract. Behind his back, the company was making plans to terminate his contract and merge his business with a competitor—without telling him. Mr. Bhasin lost his business and sued.


The Supreme Court ruled that the company breached the duty of honest performance by misleading Mr. Bhasin about its intentions. The Court established that honesty in contractual performance is a general and organizing principle of contract law, and created a new, standalone duty requiring parties to act honestly in the execution of contractual obligations.


Key takeaway: You can’t mislead the other party while carrying out your side of the contract.


Example: Employment and Termination


Imagine an employer plans to terminate an employee, but encourages that employee to decline another job offer, knowing full well they’ll be let go in a few weeks. Even if the employer offers legal notice or severance pay, withholding that critical information may breach the duty of honest performance.


Case Summary: Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26


Mr. Matthews was a senior executive who had been sidelined and misled for years by his employer about his role and future. He was eventually constructively dismissed just before a company sale that would have entitled him to a substantial payout under an incentive plan.


The Supreme Court found that his employer breached its duty of honest performance, particularly by misleading him about the nature of his role and future opportunities. As a result, he was awarded damages equal to what he would have earned under the incentive plan.


Key takeaway: The duty of honest performance applies even in cases of constructive dismissal and incentive compensation.


What It Is NOT


To be clear, the duty of honest performance:


  • Does not mean you must act in the other party’s best interest

  • Does not create a duty to disclose everything

  • Does not prevent contract termination


But it does mean you must not mislead, lie, or act in a way that intentionally deceives the other party about your performance of the contract.




Who Should Care?


Employers: Be transparent and consistent when terminating employees or enforcing rights.


Employees: If you suspect you were misled before a dismissal or denied a benefit unfairly, you may have a claim.


Small Business Owners: Whether managing a service agreement or a commercial lease, misleading conduct—even if not explicitly banned—can lead to liability.


Practical Tips


For Employers:


  • Keep communication transparent

  • Avoid ambiguous statements about future employment

  • Document decisions clearly


For Employees:


  • Keep written records

  • Flag misleading conduct early

  • Get legal advice before signing a severance agreement


Get Legal Advice from Apuntar Legal Services


Whether you’re navigating a contract dispute, a wrongful dismissal, or a breakdown in trust between partners, you have legal rights. The duty of honest performance is a powerful tool to ensure fairness and accountability—even when a contract says little.


Call us today at 4379872458

Book an Appointment: www.apuntarlaw.ca

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