Acting in Good Faith: Navigating Real Estate Agreements

In real estate transactions, particularly within the context of resale residential agreements of purchase and sale, the principle of acting in good faith is a cornerstone of ethical and fair dealings. But what does acting in good faith truly mean, and how does it influence the ability to navigate real estate agreements effectively?

2 people planting a tree to symbolize acting in good faith with one another.

The Principle of Good Faith Explained

Good Faith in Negotiation and Performance

While Canadian law does not explicitly mandate an independent duty to act in good faith in both the negotiation and performance phases of real estate transactions, case law suggests an implied duty exists. This duty is crucial once a contract is formed, emphasizing that parties should not act in ways that defeat the purpose of the agreement. During negotiations, parties are entitled to pursue their interests vigorously, but this freedom does not extend to undermining the contract’s objectives once agreed upon.

Implications for Real Estate Agreements

This implied duty of good faith means that while you can negotiate terms in your favor, you cannot later engage in actions that directly contradict the agreed-upon purposes of the contract. For example, using conditions related to financing, home inspections, or lawyer approvals must be done with genuine intent, not as a backdoor for contract termination due to buyer’s remorse.

Acting in Good Faith: Practical Implications

depiction of a couple buying a home when one partner is having buyers remorse of purchasing the home.

Conditions and Buyer’s Remorse

Real estate agreements often include conditions that allow a buyer to terminate the agreement under specific circumstances, such as unsatisfactory financing or home inspection results. However, these conditions are not meant to serve as escape clauses for buyer’s remorse. Acting in good faith means these conditions should only be invoked based on their specific terms, not for undisclosed reasons unrelated to the condition itself.

Ensuring Good Faith in Transactions

  • For Buyers: If there’s a genuine concern about potential changes of heart, it’s more forthright to negotiate a condition explicitly allowing for termination based on buyer’s discretion within a certain period. This approach maintains the integrity of the negotiation process and respects the seller’s position.
  • For Sellers: Understanding that conditions are part of the negotiation landscape is key. However, sellers and their representatives can seek to define these conditions more narrowly, ensuring they are based on objective criteria rather than broad discretion.

The Role of Legal Advice

Consulting with a real estate lawyer can provide clarity on how to structure agreements and conditions in a manner that respects the principle of good faith. Legal professionals can offer strategic advice on negotiating terms that protect your interests while ensuring fair dealings for all parties involved.


The duty to act in good faith is a fundamental aspect of real estate transactions, ensuring that parties engage in honest, ethical, and fair practices from negotiation to contract performance. By understanding and respecting this principle, buyers and sellers can contribute to a more trustworthy and efficient real estate market.

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