Concept of Good Faith in Domestic Laws – To Debrief the Common Understanding

Abstract

Good faith is described as 'the foundation of all law, or a fundamental principle of law'. O'Connor suggests that good faith derived from 'the necessity for a minimum of human cooperation and tolerance if group living is to emerge and survive'. Although good faith has origins in the earliest human societies, O'Connor suggests that the Roman concept of bonafides (associated with trustworthiness, conscientiousness and honourable conduct) represents its most direct ancestor. By about 1450 it was applied in both civil and common law systems, and was 'reflected in specific rules incorporating or referring to good conscience, fairness, equitable dealing and reasonableness'.4 As early as 1659, good faith was mentioned in Treaty between France and Spain, signed to end the Franco-Spanish War that had begun in 1635. Before that, in 1625, Grotius had referred to the Aristotelian parameter that if good faith has been taken away, “all intercourse among men ceases to exist”. Grotius also referred to Cicero‟s famous observation according to which “in good faith what you meant, not what you said, is to be considered”. The civil law regimes tend to require that contracts be formed and performed in good faith. If parties act in bad faith, this leads to mistrust, making contracting more complex and expensive. A rule of good faith increases contracting parties' confidence that contractual obligations will be performed. The principle of good faith is less established and less uniform in common law systems. At one extreme is the United Kingdom, which has no general doctrine of good faith. However, equity developed many doctrines to promote specific notions of good faith, including the concepts of undue influence and promissory estoppel. Good faith is also recognised in relation to particular classes of contracts, for example, contracts of insurance. At the other extreme is the United States, “where every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement”.