State Of Good Faith In English Contract Law

2900 words - 12 pages

The law of contract in many legal systems requires that parties should act in good faith. English law refuses to impose such a general doctrine of good faith in the field of contract law. However, despite not recognizing the principle, English contract law is still influenced by notions of good faith. As Lord Bingham affirmed, the law has developed numerous piecemeal solutions in response to problems of unfairness. This essay will seek to examine the current and future state of good faith in English contract law.

Good faith was described by Lord Bingham in Interfoto as “playing fair, coming clean, or putting one’s cards face upwards on the table.” It owes its origins to the law of equity and can be traced back to the case of Carter v Boehm , where Lord Mansfield first introduced it in insurance contracts: “Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing of the contrary”. Lord Mansfield attempted, but failed to extend good faith as a general principle in English law. Lord Hobhouse pointed in The Star Sea that Lord Mansfield’s equitable principle of good faith only survived limited classes of transactions as English law developed “preferring benefits of simplicity and certainty.” This was reasserted in Interfoto where Lord Bingham introduced piecemeal solutions, and further in Walford v Miles where Lord Ackner iterated the position that there is no overriding principle of good faith in English law as the “concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations… a duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party”.

Since its introduction by Lord Mansfield, good faith has ceased to be as widely recognized in English contract law. This is due to several reasons such as the increasing “laissez-faire” attitudes and the growth of “caveat emptor” which meant that there was little room for contracts to be negotiated on the grounds of fairness. Harrison stated another important factor for the fading of the equitable principle of good faith as the merging of equity and common law, which led common law to govern contract law. The current state of English contract law thus doesn’t recognize a good faith principle and is committed to a “more pragmatic and piecemeal approach.” Those doctrines play a role analogous to that of an overarching duty of good faith. Lord Steyn observed a use of such discrete doctrinal tools rather than an overarching principle. In Cobbe v Yeomans Row Management , Mummery L.J stated that there were plenty of ways of “dealing with particular problems of unacceptable conduct occurring in the course of negotiations without unduly hampering the ability of the parties to negotiate their own bargains”.

Lord Steyn pronounced that the...

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