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Acting in Good Faith – is this now a given under English Law?

16 October 2013. Published by Alan Williams, Partner

Under many civil law jurisdictions, such as France, Germany, and Italy, the law of obligations recognises and enforces an overriding principle (derived originally from Roman law) that in making and carrying out contracts parties should act in good faith.

Accordingly, this principle is reflected in European law.  The principle of acting in good faith has also become increasingly part of the law in common law jurisdictions.  For example, the doctrine has long been recognised in the United States, as is clearly set out in the 1918 New York Court of Appeals decision of Wigand v Bachmann-Bechtel Brewing Col, 222 NY 272 at 277: "Every contract implies good faith and fair dealing between the parties to it".  This has been enshrined in the Uniform Commercial Code, which provides in its section 1-203 that "every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement".  In Australia, the existence of a contractual duty of good faith is also now well established.

In contrast, the English law's refusal to recognise a doctrine or principle of Good Faith in the performance of contracts, and conform with other civil and common law jurisdiction had seemed increasingly beleaguered, in a less than splendid isolation.  However, a decision earlier this year by the English High Court in Yam Seng Pte Limited v International Trade Corporation Limited [2013] EWHC 11 (QB), arguably attempts to sweep away this perceived case of English exceptionalism and moves English contract law closer to conformity with civil law elsewhere in Europe.  For the full comment on this case and the Court of Appeal case, Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Trading Ltd (trading as Medirest) [2013] EWCA Civ 200, please click here.

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