Good faith

Bristol v Sainsbury's

The express term of goof faith would have to be precise and clear

What is the courts approach to implying a duty of good faith?

A specific good faith term will be implied, the courts have implied restrictions not to act dishonestly, capriciously or arbitrarily (paragon finance). But outside of the categories of insurance, joint ventures, a general duty may not be implied lightly because of the difficulty to satisfy business efficacy.

Chen Wishart on good faith

A spectrum of obligations from fiduciary relationships to commercial relationships is insufficient and a spectrum would need to consider every type of contract- an either or approach as taken by English contract law is insufficient.

Carter v Boehm

Although now restricted to insurance cases, Mansfield advocated that a principle of good faith would be applied to all contracts, thus showing the origins of the doctrine

Gold Property

An express term of good faith cannot be used to give up a freely negotiated financial advantage As in CTN Cash and carry

Bhasin v Hrynew

Canadian case - each party should, in carrying out the contract, give effect to the legitimate commercial interests of the other party.

Antons Trawling Co v Smith

Consideration was not needed to vary a contract (NZ case) Also in USA, they are seen as already having an intention to create legal relations and therefore new consideration is not required.

Analyse the criticism that good faith doesn't sit well with modern commerce

Contract law has to be certain in order to allow commercial parties to deal, good faith and certainty are not complementary. This would support Harts theory of law being a system of rules.

How does the law on consideration reflect a duty to contract in good faith?

Developing so that a practical benefit is enough A s

How does German Law recognise good faith?

Germany, under the German Civil Code, contracting parties have to observe good faith in both negotiation and performance of the contract. This is a key provision of German civil law, and involves more than just acting reasonably - it requires a relationship of trust based on the commercial dealing of the parties in a particular transaction. Despite a wealth of case law, there is no established definition of what good faith requires under a German law contract - although this case law does give guidance on the legal consequences of good faith in certain situations.

James Davies on good faith

Good faith cannot be introduced via overarching principles but has to be consistent with the current development of the law

Mid Essex

Good faith cannot cross across other express terms of the contract

Although there is no strict definition of Good Faith, what has the common law system developed it as being?

Honesty, cooperation and reasonableness English law has a strong focus on the limb of reasonableness, e.g. reasonable expectations of honest men, whereas other jurisdictions focus on other limbs. Mackay v Dicky , construction contracts, cooperation is needed and this is clear in their standard form contracts, e.g.

Watered down morality

How Canada views good faith

CTN Cash and Carry v Gallagher

Illegitimate pressure did not arise simply because CTN had monopoly power

Berkeley v Pullen

In a contract between a landowner and developer there was a clause which required the parties to act in utmost good faith. Landowner and developer in a contract for developer to enhance land and he is paid on a no win no fee basis and will be paid when planning permission is obtained. The developer did improve the land but landowner receives an offer from a third party before permission obtained and landowner wanted to sell. It was argued that an abstract definition of GF wouldn't be sufficient however Morgan J doubted this and it was held that it was a breach of the contract to not act in utmost good faith and an injunction was granted. Morgan J referred to the Australian case where USA contract code was considered, where the parties must observe the reasonable commercial standards of fair dealing Excluding contracts of bad faith as they violate community standards of decency, fairness and reasonableness. The spirit of the law Faithfulness to the agreed common purpose Referred to Interfoto - parties should not deceive each other, they should place cards face upwards Morgan held it would be a breach of the agreement and therefore an injunction was granted; the spirit of the law was vital.

Good faith and grundnorm

Kelsen said each system has a grundnorm

How would natural lawyers defend good faith?

Law reflects morals which are unchangeable, Kant says there is a moral imperative for law, Dworkin says the law is interpretive and judges are required to find the best fitting solutions, Rousseau says that law is a social contract and reflects the general will. Therefore good faith would reflect a social norm. Contract law is a social institution which moulds and is moulded by societal expectation.

What is meant by legal transplant and why is this problematic in ECL?

Legatt recognises that

Al Nehayan

Leggatt said that this contact was a relational contract and it therefore required an increased level of good faith as the interests of the parties were interlinked and thus they needed a higher level of communication and cooperation

MSC Mediterranean Shipping Company

Lord Hoffman tried to define the scope of good faith and compared it to the Canadian principle to not use contractual discretion irrationally or arbitrarily. This was rejected by the High Court

What do McKendrick and Hooley say about the scope of good faith?

McKendrick states that good faith is only a component of an implied term, Hooley says the scope is unclear and therefore creates uncertainty

Mid Essex v compass group

Parties in a long term contract to provide catering services to Mid Essex, mid Essex had the power to make deductions from price if their services weren't up to the correct standard. The deductions which were made poisoned their relationship. There was a clause requiring the parties to cooperate and to take necessary action to communicate and they breached this obligation. It was held that the duty to cooperate was vital for the common purpose of providing healthcare to patients. The many deductions made were absurd and thus the Trust had acted in an arbitrary, capricious and an irrational way.

Astor Management

The requirement of implied good faith is a modest requirement to not frustrate the purpose of the contract.

Hansard v Boots

There is not an express term but there could be an implied term not to frustrate the purpose of the contract

Collins on good faith

There should be a spectrum of obligations, from market to organisational, where market obligations reflect antagonistic contracts and organisational contracts are ones which require cooperation; in these contracts there would be an implied obligation of good faith.

What are the weaknesses of using implied terms to give effect to good faith?

They are interpreted restrictively, investors v Bromwich - Lord H laid down 5 interpretative principles, including the matrix of fact and reasonable man, Arnold has shown that the court is being more restrictive

Walford v Miles

Uncertainty / good faith. No general duty of good faith in negotiating future agreements. Facts: M agrees to terminate negotiations with 3rd parties if W provides a 'letter of comfort'. W provides this but M sells to a third party. Lock in agreements are unenforceable because they lack certainty, as there is no guarantee of agreement or what will be agreed. A lock out can be enforceable if it is for a fixed and specified period and supported by consideration or made under seal. Repugnant to the adversarial position of negotiating parties.

Yam Seng Pte v International Trade Corporation

Yam Seng were in a contract with IT where IT supplied them exclusively with perfume and Yam Seng would distribute it across Asia. Yam Seng discovered that IT were in a contract with other firms where they were charged less, Yam Seng claimed that IT had breached the implied duty of good faith to disclose the relevant information. Leggatt J said there was an implied duty to contract in good faith This duty cannot be transplanted into English law as there needs to be consideration of the context of English law but that this implied duty is a small step in ECL There needs to be a fluid notion of good faith which can be applied more stringently in relational contracts and less so in commercial

How does the USA recognise good faith?

under The Uniform Commercial Code (adopted by many States) imposes "an obligation of good faith in its performance or enforcement." Good faith is defined as "honesty in fact in the conduct or transaction concerned". For a merchant, good faith has a higher standard.