Importance Of Good Faith In Business Law

The core point of this dissertation is to evaluate whether the doctrine of good faith influence freedom of contracts or not. The thesis evaluates whether these two concepts can co-exist without chasing each other ineffective.

The right to contract is one of those fundamental rights in our society which is manifested by most international, regional and national laws. Except some limitations, which can be attributed to incapacity, status, morality, individuals are given ultimate right to conclude any types of contracts. The doctrine of good faith operates independently outside the terms of the contract, this leads many critics to argue that such obligation is unfair restriction on parties’ autonomy and freedom of contract. The other critics

The market conditions of the old eras no longer exist since current state of commerce is led by globalization and enterprises with more complex business frameworks that require more collaboration and benevolence. The more trade becomes sophisticated the more it is expected from trading parties to act mutually in an honest, reasonable and cooperated manner. In this regard, it might not be a wise thought to disregard the importance of the doctrine of good faith. Since, the doctrine can easily influence from the small village exchange of goods to the international commerce where billions of dollars are transacted to import or export goods and services in daily basis. Consequently, all those who take part in the transaction are expected to act in a good faith at least in most legal systems. Moreover, despite some differences, most jurisdictions, international laws and treaties expressly or impliedly recognize the notion of good faith in commercial transactions.

However, the question remains, what does good faith entail? Some scholars in commerce argue that, it would be a difficult endeavor to give the exact definition of good faith since, at the end of the day what matter is the intention of the contracting parties rather what the law defines as a good faith. Although, they intend to explain the concept of it and how it can be applied in any contractual transactions.

The doctrine of Equity in English law is a mechanism implemented by the legislature to shield the weaker party in contractual relations. Nevertheless, the term good faith is enshrined in other certain types of fiduciary contracts like in Trust law, the Marine Insurance Act of 1906 and the Unfair Contract Terms Act of 1977, employment law. Additionally, In the process of implementing European Directives, UK has introduced good faith principle on Directive in self-employed commercial agents and the Directive on Unfair Terms in Consumer Contracts. However, this additional inclusion might be at stake since Britain is on the verge of Brexit. What will be the fate of agreements that she concluded with the European Union is something we will see in the near