To what extent is the principle of good faith in contract law a basis for convergence between English law and other jurisdictions?

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To what extent is the principle of good faith in contract law a basis for convergence between English law and other jurisdictions? Is convergence desirable?

To begin it is necessary to define both good faith and convergence as they apply to legal theory. Good faith has a wide variety of legal definitions (an issue that will be touched on later, as it is problematic to compare a concept with no universally accepted definition), ranging from the more abstract found in statute,“honesty in fact and the observance of reasonable commercial standards of fair dealing”[1] to attempts to practically clarify the term in case law, “avoid cynical resort to the black letter of the law; observe reasonable commercial standards of fair dealing; be faithful to the agreed purpose of the agreement; and act consistently with the justified expectations of the other party”[2]. The concept of convergence theory postulates that one consequence of globalisation is that industrialised states will begin to converge socially and economically, and this results in a desire for laws to converge to facilitate international trade[3]. This essay will examine the principle of good faith in a number of European common and civil law jurisdictions to assess its development and the extent it could form the basis for convergence, before considering if such convergence is desirable.

Good faith in Common Law jurisdictions

The existence of an general principle of good faith in English contract law is somewhat questionable, as the old common law maxim ‘caveat emptor’ demonstrates. Historically it has been rejected for three core reasons; that the self-interest fundamental to a commercial contract is diametrically opposed to the idea of good faith, that good faith is too much of a subjective concept to be enforceable and lastly that it is not the way of the courts to develop the law with comprehensive principles, it is preferential for them to do so incrementally[4]. In practice the lack of acceptance of a principle of good faith can be seen in the case of Walford v Miles, where Lord Ackner dismissed it as “unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies”[5]. This blanket lack of recognition may have begun to fragment more recently, with Justice Leggatt commenting obiter in Yam Seng Pte Ltd v International Trade Corporation Ltd that a continual refusal to recognise the need for good faith was tantamount to “swimming against the tide”[6] and that the “traditional English hostility towards a doctrine of good faith in the performance of contracts, to the extent that it still persists, is misplaced”[7]. Two subsequent cases have taken his opinion into consideration when deciding if a general duty to act in good faith existed[8], however both emphasised that good faith was dependant on the context of the contract, suggesting that an overarching principle of good faith is still not a fully fledged principle in English law.

Good faith in Civil Law jurisdictions

The approach taken regarding contract law in the majority of continental Europe is shown in the axiom ‘pacta sunt servanda’, as unlike the majority of common law jurisdictions there is a tendency for civil jurisdictions to overtly recognise the principle of good faith due to their derivations from Roman law and the ecclesiastical courts of the 11-13th centuries. The idea of good faith is codified into the German Civil Code (Bürgerliches Gesetzbuch) article 242, which states the need to take the doctrine into consideration when performing the contract and article 311, which emphasises a duty to negotiate with due care (culpa in contrahendo). Despite the abstract nature of the ideal it has become a ‘general clause’ and something of a backbone of German law, forming the foundation of many doctrines and employed to avoid inequitable outcomes in cases. It is also noted to have several distinct functions with the system, serving as an instrument of clarification, a guideline for behaviour and as a defence in cases of mistaken belief[9].
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As with Germany there is an explicit mention of the general responsibility to act in good faith in French law, located in the obligations section of the Civil Code Article 1134 “les conventions doivent être executées de bonne foi”[10] and Article 1135 “la convention oblige à toutes suites que l’equité donne a l’obligation d’après sa nature”[11]. It has been noted that whilst the French commitment to good faith appears fortified by doctrine, it is diluted somewhat by the judicial distrust of equitable remedies (valeurs d’équité) and the inability of the courts and statutory instruments to make a differentiation ...

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