Does Your Contract Really Need A Duty Of Good Faith?

Take this test and find out...

Good faith is what you want to see in your dealings, but is it actually a legal obligation implied in your contract? Six years ago, a case about deodorants ignited a debate on good faith that is still burning. Other countries' legal systems, both civil law and common law, have a general duty of good faith, so why not English law? Or does it, perhaps, achieve similar results in a different way?

Try this simple test to see if you can spot, in this variety of scenarios, when English contract law might need to think about implying a duty of good faith.

A repair and maintenance contract signed months after work started was, by agreement, applied retrospectively. Before it was signed, however, the parties had agreed and used for more than 12,000 jobs a set of rates that was not in the contract. The employer initially said that there was no need to amend the contract but, after it was signed, they decided that these rates should not have been used and deducted £300,000, claiming that it had consequently overpaid. Breach of implied duty of good faith?

No duty of good faith needed: estoppel by convention kept the employer bound to the non-contract rates for the previous work.

A particularly onerous or unusual contract condition is not drawn to the attention of the other party. Breach of implied duty of good faith?

No duty needed: English contract law requires adequate notice of the condition to be given, if it is to apply.

A landlord's replies to enquiries before contract, about the presence of asbestos in warehousing, were false. Breach of implied duty of good faith?

No duty required: misrepresentations provide remedies, for example, rescission and/or damages.

The supplier of the front bumper mount for a van manufacturer threatened to stop supplies unless the manufacturer paid compensation for termination of their relationship when the manufacturer subsequently switched to a new design and supplier. To avoid shutting down the production line, the manufacturer paid up, but subsequently sued for the return of its money. Breach of implied duty of good faith?

No duty needed: economic duress, by illegitimate pressure, made the compensation agreement voidable.

A trustee selects a perfectly sensible investment but arranges for a secret commission for themselves. Breach of implied duty of good faith?

No duty needed: a trustee owes a fiduciary duty, which means, in essence, that they cannot use their position for their own...