duty of good faith

On February 5, 2021, the Supreme Court of Canada released its judgment in Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District.^[1] Wastech clarifies the nature and scope of the duty to exercise discretionary contractual powers in good faith. The appeal was heard together with C.M. Callow Inc. v. Zollinger^[2] (see our earlier blog post), which clarified the duty of honest performance established in Bhasin v. Hrynew^[3] (see our earlier blog post).

What you need to know

Wastech holds that:

1. Contracting parties have a duty to exercise contractual discretion in good faith.^[4] This duty “operates in every contract irrespective of the intentions of the parties”.^[5]
    
2. The duty requires parties to exercise their contractual discretion “in a manner consistent with the purposes for which it was granted in the contract” — i.e., “reasonably”.^[6] This duty can be breached