Good Faith

Question 1

Does English law have good faith?

Answer 1

• English law has no doctrine of good faith, unlike US for e.g.,
• no requirement of good faith in formation of contract
  ∴ could negotiate with company for sole purpose of increasing bids from other companies –> even if other company relies on this contract; can’t sue them
  BUT:
• Use of good faith in CRA 2015 - S62(4) –> term is unfair if contrary to requirement of good faith (but leaves ‘good faith’ undefined)
  –> derives from EU Unfair Terms in Consumer Contracts Directive of 1993
• Interfoto v Stiletto Visual Programmes (1988) - Bingham: ‘overriding principle in making and carrying out contracts is fair and open dealing: good faith’
• Some law has effect of good faith e.g. mitigation, limits on termination, misrepresentation, estoppel
• Canada SC - Bhasin v Hrynew [2014] - speaks on how good faith should become recognised: lack of good faith ‘produces results that are not consistent with the reasonable expectations of commercial parties’

Question 2

Is there good faith in formation?

Answer 2

Walford v Miles HC [1992]
- No general duty to negotiate in good faith –> this means no lock out agreement (agreement to not negotiate with anyone else while negotiating with C) imposed
- ∵ no time period set out ∴ too uncertain
Lord Ackner (HoL) : “the concept of good faith in negotiations is inherently repugnant… Each party to the negotiations is entitled to pursue his (or her) own interest, so long as he avoids making misrepresentations.”

Exceptions: Some types of contracts (e.g. insurance, partnerships, trusteeships)

Question 3

Is there good faith in performance?

Answer 3

• Braganza v BP Shipping [2015] - SC held there was as implied term in law that the exercise of the discretion should be in done good faith

Otherwise, no such duty to perform in good faith until:

Yang Seng (2013) - seen as modern High Trees -> Leggatt J: ‘implied term of good faith in performance was present as it was a relational contract’
- Relational contact = longer term contract (Macneil - academic) - requires Transparency, co-operation, and trust and confidence (Bates v Post Office (2019))

Responses to Yang Seng:

• Macneil argues there are limits to courts looking at contracts at point of formation (discrete vs relational) -> miss many of the total obligations (e.g. ∵ of changing circumstances) + many decided wrong
• Carter and Courtney (Cambridge Law Journal 2016)
  -> Rejects good faith implied term as unorthodox
  -> Incoherent to describe as term implied in fact when element of it – honesty – is said to apply to all contracts (which sounds more like term implied in law
  -> Unnecessary -> result could have been reached by normal approach to termination
  -> Affirms traditional approach to English Law that don’t need good faith
• BUT, Campbell (Modern Law Review 2014)
  -> Welcomes Laggatt’s formulation as based on an implied term
  -> Welcomes recognition of category of relational contracts
  -> Explains good faith elements already in English Law
  –> just needs to decide how to have doctrine of good faith