No General Organising Principle Of Good Faith In English Law: The Court Of Appeal's Decision In MSC Mediterranean Shipping Company S.A. V Cottonex Anstalt [2016] EWCA Civ 789

Back in Issue 05 of IQ, we examined the decision in Yam Seng PTE Ltd v International Trade Corporation Ltd and looked at whether a general obligation of good faith could be implied into contracts made in accordance with English law. The decision in Yam Seng was seen at the time as a change in the established approach that could potentially open the door to the possibility of implying a pervasive duty of good faith in commercial contracts. A number of subsequent cases followed the approach in Yam Seng, including the first instance decision in MSC. MSC eventually went before the Court of Appeal, where Lord Justice Moore-Bick advocated a return to the orthodox view that English law does not recognise any general duty of good faith in matters of contract.

A brief recap - good faith under English law: a recognised concept?

Many jurisdictions1 expressly include in their civil codes references to the concept of good faith in commercial dealings. In that context, an obligation to act in good faith in the making and performance of a contract becomes an express obligation on all parties. It also should be noted that the recognition of a general doctrine of good faith is not limited to just common law jurisdictions. For example, Australian courts have been known to imply broad duties of good faith into commercial contracts, and the Supreme Court of Canada recently recognised a new common law duty of honest performance2.

Whilst it is accepted that broad concepts of fair dealing can be reflected in the English court's response to questions of construction and the implication of terms, the long-standing position under English contract law is that courts have been reluctant to recognise any general pervasive duty of good faith3.

The historical reluctance of the courts to imply a general duty of good faith is due in part to concerns that doing so would likely undermine contractual certainty. Instead, the English courts have, as Bingham LJ put it in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd4, preferred to develop "piecemeal solutions in response to demonstrated problems of unfairness". There is no generally accepted definition of the concept under English law, but in the same judgment, Bingham LJ described good faith as being most aptly conveyed by colloquialisms such as "playing fair", "coming clean" or "putting one's cards face upwards on the table", concluding that it "is in essence a principle of fair and open dealing".

If the term is not expressly defined in a contract, parties will have scope for argument about what an obligation of good faith in a particular context means. Where parties have expressly included good faith obligations in their contract, the general approach is that the courts will seek to give effect to those express provisions which relate to the actual performance of a...

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