All Fair In Love, War And Commerce?

The traditional position under the contract law of England and Wales (which I shall, with no disrespect to Wales, refer to as 'English' law) has been that, save for contracts giving rise to a fiduciary relationship (eg a contract between agent and principal), a duty of good faith in the performance of a contract is not to be implied as a matter of course or as a matter of law.

That contrasts with the position in some other jurisdictions, both common law and non-common law, where such a duty is imposed by law.

In the United States of America, the Uniform Commercial Code (UCC), which applies in the law of most of the states, provides that 'Every contract or duty within the [UCC] imposes an obligation of good faith in its performance and enforcement.' Good faith is defined as 'honesty in fact and the observance of reasonable commercial standards of fair dealing'.

Similarly, the US Restatement (Second) of Contracts (1981) (which does not have official force of law, but is treated by US courts as highly persuasive authority as to the principles of contract law) provides that 'Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement'.

To take an example of a non-common law jurisdiction, the French Civil Code (a 'Napoleonic' code derived from Roman law) provides that contracts must be performed in good faith.This can result in very different outcomes in cases on opposite sides of the Atlantic or the Channel, as I experienced in an international arbitration some 30 years ago. Briefly, a written sale of business agreement was being negotiated, in English, between an English company and a French company. Just before it was signed, the French party insisted on a French governing law clause being inserted. Subsequently, the English party had various private discussions with the French government, which made it much more difficult for the contract to be performed, but did not disclose those discussions to the French party, which (when it found out) considered that it would have achieved a better outcome than the 'rosbifs' had managed. There was nothing in the written contract to indicate that such conduct placed the English party in breach of it.

When the matter ended up before a panel of arbitrators, the French party referred to the duty of good faith under the French Civil Code and argued convincingly that the English party had breached it. The case was settled soon afterwards. Under English...