Duty to disclose

How BC law treats it

Canadian contract law has no general duty of disclosure between arm's length parties. Silence alone is usually not misrepresentation. That changes where a party tells a half-truth, where a statement becomes false before the contract is made and is not corrected, where a party actively conceals a fact, or where a fiduciary or other special relationship exists. The Supreme Court's good faith cases do not create a disclosure duty. Bhasin v Hrynew, 2014 SCC 71 recognized a duty of honest performance: parties must not lie or knowingly mislead each other about matters directly linked to performance. C.M. Callow Inc v Zollinger, 2020 SCC 45 held that knowingly creating a false impression, including by half-truths or silence after misleading conduct, can breach that duty. Neither case requires a party to volunteer information against its own interest. Statutes impose disclosure in specific settings. A franchisor must deliver a disclosure document to a prospective franchisee under the Franchises Act, SBC 2015, c 35. An issuer distributing securities under a prospectus must provide full, true and plain disclosure under the Securities Act, RSBC 1996, c 418. In residential and commercial real estate, caveat emptor still applies to patent defects and most latent defects. A BC seller must disclose known latent defects that render the property dangerous or unfit for habitation, and is liable for defects it actively concealed. The Property Disclosure Statement used in many BC sales is a contractual document, not a statutory requirement, and statements in it can found a misrepresentation claim.

What it means for your business

Owners selling a business or property, franchisors, and companies raising money need to know when silence is safe and when it is not. Overstating the duty leads to unnecessary disclosure of commercially sensitive information. Understating it leads to rescission, damages or statutory claims. Sellers should correct any earlier statement that becomes untrue before signing and use the purchase agreement's representations to define exactly what is promised. Example: A Richmond seller tells a buyer the warehouse roof was replaced, but omits that it has leaked every winter since. That half-truth can support a misrepresentation claim even though the seller never had a general duty to volunteer the roof's history.

Risks and common mistakes

Assuming there is a general duty to disclose everything material to the other side of a commercial deal. Making a partially true statement and believing silence on the rest is protected. Failing to correct a statement that becomes untrue between negotiation and signing. Treating the Property Disclosure Statement as a mere formality rather than a source of liability. Reading Bhasin and Callow as requiring disclosure, rather than prohibiting dishonesty in performance.