The allegedly dishonest behaviour in Callow However, as discussed below, the decision in Callow raises more questions than it answers. Given these conflicting outcomes, the Supreme Court of Canada’s discussion of the duty of good faith in termination for convenience clauses was eagerly awaited. The Court rejected the employee’s claim that the termination was unfair and not in good faith, given the express language of the termination for convenience clause.Ĭonversely, in Ontario, the duty of good faith has been relied upon to limit an employer’s right to rely on a termination for convenience clause when an employee was terminated on the basis of his criminal record, which was known to the employer prior to entering into the employment contract (see Mohamed v Information Systems Architects Inc, 2018 ONCA 428). In Styles, an employee was terminated just prior to gaining eligibility to a bonus that he was entitled to receive after four years of employment. Rather, the language of the contract is to be relied upon to determine the parties’ reasonable expectations. The Court in particular found Bhasin did not go so far as to establish a general principle requiring the reasonable exercise of discretion in contractual performance. Prior to Callow, there had been some hesitancy by Courts to apply the duty of good faith in contractual performance to the exercise of termination for convenience clauses.įor example, in Styles v Alberta Investment Management Corporation, 2017 ABCA 1, leave to appeal to SCC ref’d SCCA No 76, the Alberta Court of Appeal indicated that the scope of the duty is narrow and, when exercising a termination for convenience clause, largely inapplicable. Specifically, the Supreme Court of Canada in Bhasin established a common law duty, applicable to all contracts, which requires the parties to act honestly in the performance of contractual obligations. Since the Supreme Court of Canada’s landmark decision in Bhasin v Hrynew, 2014 SCC 71, the duty of good faith in contractual performance has been a central organizing principle in the assessment of contractual performance. The very nature of such a clause is to allow the parties to act without regard to their counterparties’ performance or interests, as contractually agreed upon by the parties. The function of a termination for convenience clause is to permit the parties to bring their contractual relationship to an end without cause, as long as the right is exercised in accordance with the termination provision.
Good faith and termination for convenience clauses prior to Callow Overall, the decision in Callow creates potential for uncertainty in the exercise of termination for convenience clauses. However, far from clarifying the state of the law on the contractual duty of good faith, the Supreme Court of Canada’s decision seems to have left room for further clarification, particularly given the vigorous debate appearing in the Court’s concurring and dissenting reasons. The duty may be breached, depending on the circumstances at issue, if a party knowingly misleads the other party in any manner. The majority of the Court in Callow concluded that the duty of good faith arises when there is a direct link between the dishonest act and the performance of an obligation or exercise of a right under the contract. The Supreme Court of Canada recently commented on the duty of good faith in the context of a termination for convenience, or termination without cause, clause in CM Callow Inc v Zollinger, 2020 SCC 45.
But how does this duty apply to seemingly unfettered contractual rights, such as termination for convenience? In particular, parties cannot contract out of the duty of good faith in contractual performance, which requires parties to exercise their contractual rights and perform their contractual obligations honestly.
#An inconvenient truth discussion questions free#
While parties are largely free to craft any agreement they wish, there are certain limits to that freedom that cannot be overridden by any contractual provision.