Chapter 15 in essence

1. The meaning of ‘good faith’ is unstable. However, there is authority that it refers to respect for the legitimate interests of the other party as an equal, expressed as:

  1. honesty, and
  2. fair dealing, and respect for the contract made, expressed as:
  3. fidelity to the contractual purpose.

2. Arguments in favour of recognising good faith in English law include:

  1. English law already embodies good faith principles as described in 1.
  2. it would enhance transparency and coherence.
  3. it is recognised in many other civil law and even common law jurisdictions.
  4. it protects the institution of contract by making it more likely that parties will enter contracts.

3. Arguments against recognising good faith in English law include:

  1. Interference with freedom of contract;
  2. It is not for the courts to give such recognition;
  3. It is uncertain; and
  4. It would make English law less attractive as the law governing contracts internationally.

4. Good faith may be adopted at three different speeds:

  1. as an independent cause of action;
  2. as an active inspiration creating new doctrines and expanding existing doctrines to align with the three requirements; or
  3. as an explanatory, organisational and legitimising principle underlying existing law.

5. The characteristics of good faith are that it:

  1. may be conceived as externally imposed, or internally assumed by the parties;
  2. can leave ample scope for freedom and self-interest;
  3. varies with the social and legal culture;
  4. is episodic and consistent with common law incrementalism; and
  5. is expressed through existing legal doctrines, the application of which varies with the type of contract in question.

6. The intensity of the demands of good faith as honesty, fair dealing and fidelity to the contractual purpose, increases with the following list of the broad types of contracts in question, whether:

  1. arm’s length contracts;
  2. symbiotic (relational) contracts;
  3. contracts involving recognised inequality of bargaining power; or
  4. contracts involving a fiduciary relationship.
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