The effect of creditor's good faith on consequences of unfounded terminations of contracts

Abstract

The purpose of this paper is to draw attention to the problems caused in practice by the so-called unfounded terminations (wrongful unilateral termination; termination without cause) and to emphasize the need to create an integral practice with respect to their sanctioning. Unfortunately, the doctrine does not offer sufficient solutions to above mentioned problem, and certain rare attempts to theoretically explain this phenomenon remain in the shadow of individual judicial/arbitration disputes. Still, it seems that no major attempts were made in order to solve the problem on a conceptual level. The author argues that unfounded termination should be qualified as a breach of contract and suggests that the consequences resulting from such a breach should be more precisely defined. Furthermore, the author seeks the answer to the question whether the creditor's good faith affects the consequences of unfounded terminations, or, in other words, whether the creditor's bad faith makes a necessary condition for the emergence of certain consequences. There is undoubtedly something wrong in the regime of unilateral termination of contract, especially because these terminations are often spoken of as 'terminations at own risk'.