Bhasin v Hrynew

BSEN 395

*************Facts***********************************************************************************************************

Mr. Bhasin was the enrollment director for Canadian American Financial Corp. starting in 1989.

Can-Am marketed education savings plans to investors through enrollment directors.

The enrollment directors were essentially small business owners.

Mr. Bhasin had been in business for 10 years and built his business over those years.

Can-Am recognized Mr. Bhasin as one of his top enrollment directors.

Can-Am and Mr. Bhasin had an enrollment director agreement beginning in 1998.

The contract was for a 3 year period but termination could happen on short notice for misconduct or other cause.

The contract would automatically renew after 3 years unless one of the parties gave 6 months written notice.

Under the contract, the enrollment directors owed a fiduciary duty to Can-Am, Can-Amowned the client lists, and the enrollment directors had to sell Can-Am products exclusively.

Mr. Hrynew was another enrollment director and a competitor of Mr. Bhasin.

When Mr. Hrynew began working with Can-Am they promised him that they would give consideration for mergers that took place.

Mr. Hrynew wanted to merge his business with Mr. Bhasin as Mr. Bhasin had a niche market that was considered lucrative.

Mr. Hrynew pressured Can-Am to force a merger between Mr. Bhasin and himself.

Alberta Securities Commission became concerned with Can-Am's compliance and required them to appoint a single provincial trading officer to review its directors for compliance with securities laws.

Can-Am appointed Mr. Hrynew to that position.

The role required him to conduct audits of Can-Am's enrollment directors.

Mr. Bhasin objected to Mr. Hrynew reviewing his confidential information.

Can-Am became worried they might lose their license.

Can-Am lied to Mr. Bhasin telling him that Mr. Hrynew was obligated to treat information reviewed confidentially and that the commission rejected Can-Am'sproposal to have an outsider conduct the audit.

Can-Am ended up terminating Mr. Bhasin's enrollment director contract in May 2001, after Mr. Bhasin continued to refuse to allow Mr. Hrynew to view his files.

After Mr. Bhasin was terminated, Mr. Hrynew successfully solicited the majority of his sales force.

Mr. Bhasin went to work with one of Can-Am's competitors at a lower rate.

Mr. Bhasin sued Can-Am and Mr. Hrynew for breach of an implied term of good faith, Mr. Hrynew had intentionally induced breach of contract, and both Can-Am and Mr.Hrynew were liable for civil conspiracy.

*************Issues****************************************************************************************************

Did Mr. Bhasin properly plead breach of the duty of good faith?

Did Can-Am owe Mr. Bhasin a duty of good faith? If so, did it breach that duty?

Are the respondents liable for the torts of including breach of contract or civil conspiracy?

If there was a breach, what is the appropriate measure of damages?

*************Analysis*******************************************************************************************************

The contract did not fall into any contract category that had previously been held to require good faith.

The non-renewal clause was not intended to permit Can-Am to force a merger, butCan-Am used it for this

The court made two incremental steps forward to clarify and solidify the common law.

The Court acknowledged that good faith contractual performance is a general organizing principle of the common law of contracts.

This duty of good faith applies to all contracts to act honestly in the performance of contractual obligations.

The primary goal of contractual interpretation is to give effect to the intentions of the parties at the time the contract was formed.

Parties are generally assumed to have intended to meet a certain minimum standards of conduct.

The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner.

Appropriate regard for the other parties interest will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases.

Merely requires that a party not seek to undermine those interests in bad faith.

Unlike fiduciary duties, good faith performance does not engage duties of loyalty to the other contracting party or a duty to put the interests of the other contracting party first.

Good faith will be highly context-specific with an understanding of what honestly and reasonableness in performance require.

*************Conclusion****************************************************************************************************

There is a duty to perform contractual obligations honestly.

This means parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.

This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract.

A party to a contract has no general duty to subordinate his or her interest to that of the other party (with exceptions).

The respondents breached their duty of honesty.

**********************************************************Questions********************************************************

Who is the Appellant and who is the Respondent?

Which Court wrote the case?

Where is this case binding?

What is the most important takeaway in this case?

Using the facts, analyze how Can-Am breached its duty of good faith?