Honesty is now the law

by Jamie Henry17 Feb 2015
A Supreme Court of Canada ruling has taken “two incremental steps” that will change the way real estate contracts are written and acted upon.

While this ruling isn’t new – it was released in November 2014 – it has been making headlines lately, leading some agents to question what it really means for them.

The incremental steps to which the SCC refers are a newly established principle of good faith, and a duty of honesty in contractual performance.

The principle of good faith is present in all contracts – including those involved in real estate transactions – and ensures the participants in a contract continue with regard to one another. For instance, listing agents should consider the fact that buyers don’t want to overpay for a property and proceed through the transaction with that in mind.

The duty of honesty part requires that those involved in a contract together must not knowingly lie or mislead each other. For example, an agent can’t claim to have only two registered offers on a property if that’s not the case.

Essentially Canada’s highest court has indoctrinated these best practices into law, and now agents are contractually obligated to work with the utmost integrity – something most agents did anyway.

SCC Justice Thomas Cromwell explains:

“In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just. The first step is to acknowledge that good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. The second is to recognize, as a further manifestation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.”
 

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