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Duty of Fair Play and Honesty in Contractual Performance

Parties to a contract owe an obligation of honesty towards each other (Bhasin v. Hrynew, 2014 SCC 71).  They must not act capriciously or arbitrarily.  In the simplest of terms – parties must be honest during performance of a contract and not mislead each another.

Recently, we applied this principle to a consulting and service contract on behalf of our client Li Geng, against S.I. Systems Partnership.  The Staffing Agency hired Mr. Geng through his incorporated entity for an eight (8) month term to work on a project with the Royal Canadian Mounted Police. 

Mr. Geng enjoyed a long-term relationship with the RCMP.  It was seeking a specialist with Mr. Geng’s experience and qualifications to develop a plan to modernize the Criminal Justice Repository.  Mr. Geng previously worked with the RCMP through a different placement agency and was searching for a staffing agency with a contracting vehicle so he could resume his involvement with this very important project.

After reaching an agreement with the RCMP Mr. Geng approached S.I., Systems Partnership who agreed to be the contracting agent.  Typically the federal government, including its various agencies, don’t contract directly.  It requires consultants be placed through one of the many staffing agencies with a Standing Offer. 

The RCMP renewed Mr. Geng’s contract for three (3) years.  Mr. Geng signed extension agreements with S.I. Systems, in the normal course.  In 2012 S.I. Systems Partnership upgraded its systems to a new electronic renewal program.    

Unbeknownst to Mr. Geng the contract he received included a non-solicitation and non-competition agreement preventing him from working with the RCMP on completion of the contract. 

Years later, when Mr. Geng did not renew his contract with S.I. Systems Partnership, it started a law suit against Mr. Geng claiming over $200,000.00 in damages for breach of contract arguing it had an enforceable Non-Solicitation Covenant preventing him from providing any services to  the RCMP on the Criminal Justice Information Modernization project (or any of its projects) through any organization other than S.I. Systems Partnership.

Mr. Geng was shocked to discover the new restrictive terms in the electronic agreement.  Many years earlier, when he first decided to contract with the RCMP, he told S.I. Systems Partnership he would not agree to anything limiting his right to work for the RCMP in the future.

We argued S.i. Systems Partnership breached its duty of honesty in the performance of its contractual obligations.  It failed to disclose to Mr. Geng the inclusion of the Restrictive Covenant in the renewal agreement.  Justice MacLeod, on behalf of the Superior Court of Justice, agreed  recognizing if S.I. Systems wanted to alter its long-standing agreement with Mr. Geng it must notify him.  This is particularly so where it is known the contracting party does not agree to the new clause and did not consent to the restriction.

Employees, consultants, and contract workers alike have a right to fair play during the performance of a contract.  While there is no obligation to put the interests of the other contractual party first good faith and fair dealing is an organizing principle that underpins contractual performance.