Samuel Mosonyi and Dominique Michaud

The Supreme Court of Canada recently clarified the duty of honest contractual performance in C.M. Callow Inc. v. Zollinger. In a nutshell, the Supreme Court has clarified that silence, omissions, and half-truths can be deceptive and a breach of the duty of honest contractual performance. The remedy to such a breach is damages that place the injured party in the same position as if the breach had not occurred.

While the duty of honesty is not a new concept in the realm of contract law, this case helps to define the scope of that duty.

Callow builds on pre-existing case law that establishes a duty of good faith in contractual performance and extends this duty to circumstances where a party knowingly misleads a counterparty or fails to correct the counterparty’s mistaken assumptions. The leading case on this duty prior to Callow was the Supreme Court decision in Bhasin v. Hrynew, which discussed an organizing principle of good faith that parties must perform their contractual duties honestly, and that a contracting party should have appropriate regard to his counterparty’s legitimate contractual interests.