Good Faith: English Hostility, Unworkable Obligations for Commerce, or a Healthy Development? What to Expect in Canada?

On 30 October 2016, a significant new landmark in international trade was reached by the signing of the Comprehensive Economic and Trade Agreement, the CETA, between the European Union, the EU, and Canada. In an over 1,000 pages long document, the parties outline details on how to ‘strengthen their close economic relationship, … create an expanded and secure market for their goods and services through the reduction or elimination of barriers to trade and investment, [and] establish clear, transparent, predictable and mutually advantageous rules to govern their trade and investment’. In accordance to the Joint Interpretative Instrument on the CETA the agreement ‘embodies the shared commitment of Canada and the European Union and its Member States to free and fair trade’ and ‘creates new opportunities for trade and investment for Europeans and Canadians’. In respect to small- and medium-size enterprises, ‘for whom trying to meet the cost requirements of customers is a constant challenge’ the document specifically states that the CETA will allow ‘virtually all manufactured goods to be exported duty-free’. Notwithstanding the severe opposition that signing of this agreement has met on both sides of the Atlantic, the initiative is also met with positive tones. Although it is too early to say, as to what extend the CETA will contribute to the expansion of trade between the signing parties, it is expected that far more contracts will be signed and agreements entered into between businesses incorporated in Canada and the EU, respectively. Businesses in the civil law continental Europe are used to the concept of good faith in negotiations and subsequent performance of their contractual obligations. Businesses in the common law jurisdictions, however, have a quite different view to that regard. Canada has inherited its contract law principles from the United Kingdom. On the question of good faith, however, it seems like the jurisdiction is departing – albeit cautiously – and moving away from the traditional English hostility towards good faith in contractual obligations, thus, creating its path and a unique conception of it. This article will attempt to elucidate some important aspects of the current developments in connection to good faith in Canada. Hopefully, the article will provide some guidance in how to understand good faith and what to expect in a Canadian business and legal environment to avoid misunderstandings and unpleasant consequences that potentially could arise from that.

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