In the world of employment, Wallace v. United Grain Growers Ltd. established a duty on the part of employers to act in good faith while in the course of dismissal. In the decade or so following that decision, virtually every wrongful dismissal included an allegation of bad faith.
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. 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 (see our earlier blog post), which clarified the duty of honest performance established in Bhasin v. Hrynew (see our earlier blog post).
What you need to know
Wastech holds that:
- Contracting parties have a duty to exercise contractual discretion in good faith. This duty “operates in every contract irrespective of the intentions of the parties”.
- 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”. This duty can be breached
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