June 01, 2015
In its ruling on Bhasin v. Hrynew, the Supreme Court of Canada for the first time cited the "duty of honesty" as an obligation in the performance of contracts under common law. This newly defined standard in contract law has elicited a range of reactions from lawyers who will need to interpret its implications in day-to-day practice. In an article examining the significance of this decision, Lexpert sought comment from partner and litigator David Wawro, who practises out of Torys’ New York office. Below is an excerpt of the article.
Certainly, the duty of good faith has impacted drafting and negotiating practice in various states, including New York, California, Texas and Illinois, which have had the duty in their laws — in some cases for almost a century.
“Lawyers try to anticipate where issues of discretion or judgment will arise in the context of the contract, and then try to craft some definition to avoid running afoul of bad-faith allegations,” says David Wawro of Torys LLP in New York. “When drafting earn-out provisions, for example, people define very explicitly what the buyer will and won’t do in running the business so as to avoid allegations of bad faith. ‘Best efforts’ clauses now also define very carefully what ‘best efforts’ means.”
To read the full article, click here.
For a detailed analysis of Bhasin v. Hrynew, read our bulletin “Administrative Suspension Can Constitute Constructive Dismissal.”