Good Faith In English Law

Introduction

The traditional English law has long been holding a hostile position towards recognising the duty of negotiation in good faith, let alone the general principle of good faith in other jurisdictions.

Notwithstanding the underlying legal difficulties in Walford v Miles, a general principle should be established to facilitate business efficacy, fairness and reasonableness in legal development.

Hereinafter, I will analyse its rationale in English law and submit the possible application of general principle of good faith with reference to both common law and civil law jurisdictions.

Traditional position of “good faith” in English law

Walford was a classical decision demonstrating English court’s denial of duty of good faith in

Thus, obligation may arise when negotiation reach an advance stage, parties are bound to act in good faith including disclosure of necessary information.

Objective criteria

Meanwhile in Hong Kong, the court in Hyundai Engineering and Construction Co Ltd v Vigour Ltd has testified the assessment of “good faith” is workable in practice by putting forward the similarity between “good faith” and English equitable jurisdiction’s measure in ensuring fiduciaries have not act in bad faith towards beneficiaries.

Speaking of criteria in determining “good faith”, the standard should best be regarded objectively, to determine whether a commercial acceptable person in reasonable and honest manner would in all circumstances acting consistent to the mutually agreed activity.

Further legal development is after all inevitable as parties keep relying on mutual trust and frequent co-operation in contracts. The reluctance in adopting the principle denies predictable and certain contractual relationship, parties who seek to contract in a reasonable commercial standard will have to go through lots of difficulties and ambiguities with the contract context under current

In point of fact, it is impractical to equate the two natures of contractual parties. Contrary to the adversarial nature of classical contract, “most commercial contracts are in fact relational contracts,” common examples are franchise agreement, long-term distribution agreements and joint venture agreements.

Relational position usually comes along in long-term contracts. The significant feature is parties putting “interests of his fellows ahead of his own interests at the same time that he puts his own interests first.” , when parties enter ‘lock-out’ agreement as in Walford, the feature was embodied in one giving up possible better negotiation with any third party. Since actors’ mutual interests are related to the well-being and prosperity of each others, intention can be presumed without difficulties.

Contract can only operate effectively and predictably provided that there is mutual trust and co-operation. Hence implying good faith is requisite for the advantages of both