Pre-contractual Duties and Good Faith Flashcards
What is the general position on good faith in English contract law?
Walford v Miles - UKHL - Lord Ackner - good faith is repugnant to the adversarial positions of the parties.
This upholds freedom of contract - parties must be free to explore the market without having to commit.
Pratt Contractors v Transit NZ - PC - Lord Hoffmann very critical of good faith.
What is another problem with good faith?
David Thomas QC - good faith has no consistent definition and English courts would prefer certainty.
What about abroad?
French Code Civil Article 1134 recognises a duty to negotiate in good faith, as does German law.
US law also recognises a duty to negotiate in good faith - Macmahon.
The UNIDROIT Principles outline rules of good faith negotiations.
What is Collins’ position?
Although there is no duty to act in good faith,
There is a strong duty not to negotiate in bad faith,
To the point at which parties will be liable even though they may well have acted in good faith i.e. negligent misrepresentation and breach of fiduciary duties.
What is another practical issue with good faith?
It is almost impossible to quantify the loss that flows from breaking off of contactual negotiations.
This is the type of issue that tort law has had difficulty addressing with regard to loss of chance.
What is English law’s on misrepresentation?
English law prohibits parties from making ‘false statements of existing fact or law’.
Outline negligent misrepresentation.
Negligent misrepresentation needn’t involve bad faith.
Esso v Marden is the leading case - Denning MR - Esso’s skill and expertise meant that they had made a negligent misrepresentation when failing to amend their sales predictions for the gas station.
The Hedley Byrne special relationship must be shown.
Distinguished from Bisset v Wilkinson where the representation was not deemed to be negligent as the vendor had no particular skill or expertise and the land had never been used for sheep farming.
How is S2(1) Misrepresentation Act 1967 different?
No special relationship needs to be demonstrated.
The burden is on the representor to show that he had reasonable grounds for his belief.
No remoteness rules apply so damages can be very generous.
How about innocent misrepresentation?
This will generally not involve bad faith - evidencing Collins’ argument.
Damages are still available under the Act.
Fraudulent Misrepresentation?
The only truly ‘bad faith’ example of misrepresentation.
Fraud is given the meaning from Derry v Peek.
The contract is voidable and generous damages are available, sometimes in the tort of deceit - East v Maurer.
What is the law relating to failure to disclose information?
No general duty to disclose information (it may be sensitive).
Onerous terms must be drawn to attention - Interfoto v Stiletto (particularly with standard term contracts).
Terms must be incorporated at the time of contract formation - Olley v Marlborough Court.
Where is there a duty to disclose information?
Contracts uberrimae fidei i.e. insurance require all necessary information to be disclosed.
This is an area where English law does require good faith in the pre-contractual stage.
Explain abuse of position of trust.
A fiduciary (i.e. professional trustee) owes a duty of good faith as part of their fiduciary duty.
Bristol & West v Mothew - solicitors owe their clients duties of care, although giving negligent advice won’t automatically mean that the duty has been breached.
What is the law on misleading implied promises.
Not really an issue of good faith - the courts have avoided unfairness.
The court may infer implied contracts from conduct and statements made during negotiations.
Blackpool and Flyde Aero Club - an invitation to tender was not considered due to intervening circumstances - the court imputed a contractual relationship to consider the offer.
Explain Estoppel.
A means of avoiding bad faith.
Crabb v Arun DC - an oral promise that a right of access would be granted was honoured by the court.
The claimant had suffered detrimental reliance and o the defendant was estopped.
