Towards a General Notion of Good Faith in English Contract Law

Abstract

English law has time and again denounced the existence of an overriding principle of good faith in its jurisdiction. Contrary to its civil law counterparts in Europe that embrace the general principle of good faith, it has chosen only to apply good faith in a piecemeal fashion and for specific areas. It asserts that the general principle of good faith is totally repugnant to the fundamentals of its legal system that favors creating incremental and specific solutions to legal issues, that adheres to the legal principle of party autonomy and holds sacred legal certainty. It is adamant that it does not need a general principle of good faith for it has its own homegrown rules to ensure that justice, fairness and reasonableness prevails in its legal system. In the recent years, the unwavering position of English law against good faith is continuously being tested. For one, the duty of good faith has found its way into English law via various European Union harmonisation instruments such as The Commercial Agents (Council Directive) Regulations 1993 implementing Council Directive 86/653/EEC and The Unfair Terms in Consumer Contracts Regulation 1999 implementing Council Directive 93/13/EEC, and with more harmonisation efforts expected in the near future with current talks of a European Sales Code and the presence of Principles of European Contract Law by the Lando Commission. For another, the current economy has already shifted from a domestic concern into a global one. Consequently, contracts at this day and age cease to be a national affair. This means that the good faith principle, which exists in most countries with civil and mixed legal systems making up the majority of not only European countries but the rest of the world, will continuously govern or form part of many contracts touching English law whether it likes it or not.Moreover, the growing acceptance of the principle of good faith in other common law countries has attracted many writings by English law scholars in the recent years and this has also inspired recent English court decisions to give good faith a second look or even impute it in contractual obligations. In fact, Longmore LJ expressed his sentiment to reconsider the House of Lords’ dictum in Walford v. Miles citing Lord Steyn who criticised such narrow approach. Lord Steyn even stated that the principle of good faith is not a world of difference from English law’s doctrine of reasonable expectations of the parties and that duties of good faith, when imposed on the parties, can easily be accommodated by English law. Some authors suggest that English law’s often resort to the implication of terms and other legal doctrines that give more emphasis to party loyalty, the protection of reliance, cooperation, consideration of the other party’s interest, and substantive fairness, signals its movement away from the will theory and thus ready to revive the ethical foundations of contract law existing before the 19th century. With all the foregoing developments on the principle of good faith in English law and its continuous growing influence, it is time to revisit whether English law’s open denunciation of a general principle of good faith remains true today. English law is described to be a dynamic legal system which always transforms to meet the needs of the times and to create conditions conducive for growth and development. Given the current global economy, the need to adapt to the European and global dimension of contract law carrying more complex transactions and relationships which renders the old and simple system of English contract law no longer sufficient to determine the parties’ intricate contractual obligations and their manner of performance, is English law now ready to abandon its headstrong position that it does not accept the general duty of good faith and is in fact heading towards this direction in contract law? The objective of this work is to answer this question by comparing the treatment and the level of acceptance of good faith in prominent European civil law systems, common law systems and of course, in English law. It will take into account recent developments in English law and with these, benchmark the current level of acceptance of good faith by English law and determine whether it is going towards a general principle or not.