The appellant contractor brought an action for breach of contract after the respondent condominium corporations exercised a contractual termination clause following months during which the respondents knowingly misled the appellant into believing the agreement would not be terminated.
The majority held that the duty of honest performance, as formulated in Bhasin v. Hrynew, precludes active deception and applies to the exercise of all contractual rights, including termination rights; the respondents breached that duty by failing to correct the false impression they had created, which was directly linked to performance of the contract.
A concurring minority agreed on liability but differed on the measure of damages, holding that the duty of honest performance vindicates the reliance interest rather than the expectation interest.
The dissent would have dismissed the appeal on the ground that the respondents' conduct did not materially contribute to the appellant's mistaken belief and did not constitute the active dishonesty required for a breach of the duty of honest performance.
The appeal was allowed and the trial judge's award of damages was reinstated.
