The Enforceability of Agreements to Negotiate in Good Faith: The Impact of Bhasin v Hrynew and the Organizing Principle of Good Faith in Common Law Canada

Abstract

In Bhasin v Hrynew, 2014 SCC 71, the Supreme Court of Canada established that good faith is a “general organizing principle” that underlies contract law and declared a new common law duty of honest performance. The decision speaks to obligations in the performance of a contract but has important implications with respect to the legal characterization of contract negotiations. Canadian courts have generally held that an agreement to negotiate in good faith is a mere agreement to agree and therefore not sufficiently certain to meet the requirements of contract formation. The Supreme Court’s analysis of good faith lends strong if not overwhelming support to the view that an agreement to negotiate in good faith is a contract; a party to such an agreement who fails to act honestly or otherwise in good faith in the conduct of negotiations may therefore be liable in damages for breach. This paper discusses the analysis supporting that conclusion and identifies issues arising from it, including the meaning of honesty and good faith in this context and the problem of assessing damages.

Keywords: contract, negotiation, Bhasin, good faith