Advantages and drawbacks of Good Faith implementation in Contract law
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Corporate and Business Law
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Corporate And Business Law
The civil law includes ‘good faith’ which is important principle regulating contractual dealing. Taking into consideration the norms controlling the formation and implementation of contracts it is implied that good faith standards better regulate the cases where contracting parties fairly treat...
advantages and drawbacks of good faith implementation in contract law
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Advantages and drawbacks of Good Faith implementation in
Contract law
The civil law includes ‘good faith’ which is important principle regulating contractual dealing. Taking into
consideration the norms controlling the formation and implementation of contracts it is implied that good faith
standards better regulate the cases where contracting parties fairly treat each other in the negotiation. The good
faith application can vary from one civil jurisdiction to another in a certain extent and capacity. The perplexity
also happens in good faith principle with the question: what is the essence and duties come from it?
Moreover, English law does not have particular rule according to which contracting parties accept ‘good faith’.
But with different approaches some certain cases related to good faith principle are somehow accepted in
English contract law. The full adoption of this general principle in common law systems could contribute
contracting regulations. However, English law generally rejects to implement good faith doctrine in contractual
dealings because of significant drawbacks.
The reason to choose this counter-argument topic is not only to compare the both positive and negative sides of
good faith adoption in English contact law but also get introduced to the core of the general doctrine in civil law
and understand the different approaches applied in contract dealings with English law and good faith principle.
Weighing pros and cons we could conclude whether good faith is worth recognizing or not.
The Good Faith Principle
Originally, good faith principle came from Roman law and it contains ‘strict law’ letting courts to base on
circumstances and consideration of justice. In Germany good faith implies the idea 'Treu und Glauben’ which
means ‘fidelity and faith’. “Treu” comprises fidelity, faithfulness, loyalty, reliability and ‘Glaube’ purport faith
and reliance. Both of them depict the honesty and loyalty for contractors. Thus, they do not function as a legal
criterion with particular requirements which have to be examined but are represented as ‘open’ standards
(Whittaker et al., 2000).
Good faith is adopted not only in Germany but also in France and Italia. However, French courts apply good
faith with different approach in regulation of contract dealings. This general principle is premised on the theory
, of abuse of rights which was created in the nineteenth century (Fabre-Magnan, 1995). It implies that in the case
of abuse of rights the party receives restrictions and limitations on his or her own rights to the certain extent. An
individual’s action is considered as abuse of rights when the person has intention to do harm to another person
and when the intention contradicts the social and economic interests of another side.
In general, good faith is prescribed as obligating principle which requires contractors to act in negotiations and
other cooperative dealings in accordance with honesty, integrity and with interests of each side. As Furmston et
al. (1998) points out that the good faith doctrine should be accomplished with loyalty in negotiation and act
against bad faith notion.
English Contract Law
English contract law does not possess the rule according to what the parties do contractual deal with the good
faith principle. But it does not purport that parties have entire freedom in contract relations. English law lets
parties to stop the proceedings prior to termination of the contract. Regarding the pre-contractual cases legal
responsibility is binding in certain situations such as fraudulent representation or negligent misstatement
(Lando and Beale, 2000).
In the eighteenth century, the good faith doctrine was accepted in English common law. However, English law
does not consider making it as a principle. Zimmermann and Whittaker (2000) propose that English contract
law strongly represents acting fairly in order to create justice with contractors. This fact is indicated as good
example of fair dealing. Although English law rejects the expression of good faith it adjusts the rules of fair
dealing in contractual circumstances.
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