The Implied Duty of “Good Faith” in Australian Contract Law.
This exert taken from an article by Matthew Harper of Murdoch University.
Introduction.
"Australia has not yet committed itself to a definitive principle of good faith in contract law. Unlike the legal systems in Europe and the United States, Australia does not demand an explicit legal prerequisite of good faith to form a contract. Decisions in different jurisdictions have however considered the validity of the values identified in the doctrine of good faith within contract law, such as loyalty, honesty and cooperation. Good faith is valuable because it provides confidence in the formation of contracts between two parties. However there are conflicting views and criticisms of the doctrine of good faith.
The “pragmatic theory of cooperation” underlines the effectiveness of the common law system and emphasises that there is not a need for a clearly defined doctrine of good faith. Economic theory (the “repugnancy thesis of self interest”), goes further and criticises the ability the doctrine holds to oppressively “constrain the pursuit of self interest.” Although the doctrine may be valuable, the ramifications and effects that such a doctrine would create, need to be analysed and evaluated. In addition this essay will explore how established the doctrine of good faith is within Australian contract law.
Requirements To Establish “Good Faith”.
The implied doctrine of good faith is not clearly established within Australian contract law. Therefore there are no clearly defined criteria or requirement to formulate “good faith” in a contractual relationship. Concepts such as cooperation, reasonableness, proper purpose and legitimate interest can at times seem vague, however they are often linked to the implied duty of good faith.
It can be argued that in Australia, identifying “bad faith” in contract law is more feasible than proving “good faith” (or lack thereof). This “excluder” analysis formulates an alternative approach in identifying the traits required to formulate “good faith.” To establish good faith, a variety of values contrary to those which form the basis of “bad faith” need to be accumulated. The economic view still supports the right for individuals to negotiate the best contract. Evaluating these philosophies and relative terms individually enables a closer critique of the doctrine of good faith."
More can be gained about, "The Law on Good faith, Good faith requirements in Australian legislation and judicial interpretation of the concept", by reading Good Faith, Bad Faith Or Ugly Behaviour. A paper prepared by Laura Grant Adrian Teh and Steve Lancken, from Murdoch University.
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