This chapter discusses the role of good faith in contract law, first analysing the decision in Walford v. Miles [1992] 2 AC 128, where it was held that an obligation to negotiate in good faith is not valid. It then examines the reasons that led to the decision and also explores its limits. Next, the chapter considers the arguments that have been advanced in support of the refusal of English law to recognize the validity of a doctrine of good faith and then turns to the arguments that have been advanced by those who support the recognition of a doctrine of good faith. It concludes by examining the development of a doctrine of good faith in the performance of contracts.
Chapter
15. Good Faith
Chapter
15. Good Faith
This chapter discusses the role of good faith in contract law, first analysing the decision in Walford v. Miles [1992] 2 AC 128, where it was held that an obligation to negotiate in good faith is not valid. It then examines the reasons that led to the decision and also explores its limits. Next, the chapter considers the arguments that have been advanced in support of the refusal of English law to recognize the validity of a doctrine of good faith and then turns to the arguments that have been advanced by those who support the recognition of a doctrine of good faith. It concludes by examining the development of a doctrine of good faith in the performance of contracts.
Chapter
Midland Bank Trust Co. Ltd v Green [1981] AC 513, House of Lords
Essential Cases: Land Law provides a bridge between course textbooks and key case judgments. This case document summarizes the facts and decision in Midland Bank Trust Co. Ltd v Green [1981] AC 513, House of Lords. The document also includes supporting commentary from author Aruna Nair.
Chapter
Midland Bank Trust Co. Ltd v Green [1981] AC 513, House of Lords
Essential Cases: Land Law provides a bridge between course textbooks and key case judgments. This case document summarizes the facts and decision in Midland Bank Trust Co. Ltd v Green [1981] AC 513, House of Lords. The document also includes supporting commentary from author Aruna Nair.
Chapter
20. Good faith
This chapter considers the principle of good faith. English law has traditionally been cautious about wholeheartedly adopting an overriding principle of good faith preferring instead to avoid unfair outcomes through particular doctrines (for example, misrepresentation, duress, and undue influence). However, the law in this area is developing. It appears that agreements to negotiate in good faith are not enforceable where no contract is yet in place, but, where the parties have already made an agreement, a term (whether express or implied) that the contract should be performed in good faith is enforceable. Similarly, there may be (implied) terms that discretionary powers be exercised in a manner that is not irrational or unreasonable.
Chapter
16. Unconscionability and unfairness
This chapter is concerned with unconscionability, good faith, and inequality of bargaining power. It is often stated that there are no such general doctrines in English Law. Concerns about uncertainty clearly play a part in this, and there is a tension between freedom of contract and intervening in the bargain reached by the parties on the basis of its substantive unfairness. There has, of course, been legislative intervention in relation to the use of unfair exemption clauses and unfair terms, more generally, in the consumer context (see Chapters 10 and 11) and, before such legislation, in particular, judges were prepared to manipulate common law rules on incorporation and construction (see Chapter 9) to deal with unfairness. This chapter principally deals with cases in which the courts have intervened in a contract, or refused to enforce it, where one party had some weakness in his or her position, in relation to the other, and that other has gained unduly advantageous terms. Whether there is a duty to act in good faith, implied or otherwise, in light of recent case law such as Bates v Post Office, is also explored.
Chapter
14. Unfair Terms in Consumer Contracts
This chapter focuses on Part 2 of the Consumer Rights Act 2015. The Act gives to the courts much broader powers to regulate terms in contracts which have been concluded between traders and consumers. Section 4.2 examines the individual sections of Part 2 of the Act and the leading cases decided under the Regulations which preceded the Act. Particular attention is given to key concepts such as ‘significant imbalance’, ‘good faith’, the exclusion of certain terms from assessment for fairness, the indicative and non-exhaustive list of terms that may be regarded as unfair (often referred to as the ‘grey list’), and the role of regulators in the enforcement of the legislation. Section 4.3 draws on work done by Professor Susan Bright in relation to the role of the Unfair Contract Terms Unit in the early days of the enforcement of the legislation.
Chapter
1. Introduction to the Study of Contract Law
This introductory chapter provides an overview of contract law and its application. A contract is an agreement made with intention that it will be legally enforceable. Contract law concerns issues regarding the formation of contracts; the sources, interpretation, and regulation of terms; when a breach takes place and the resulting consequences; and ways to escape a contract through vitiating factors, mistake, or frustration. The parties’ intentions are determined using an objective approach based on the standard of the reasonable person. A lot of contract law can be understood as default rules to apply when the parties have not been clear enough about their intentions. The law of contract also concerns foundational principles and mainly consists of common law rules. Many cases still give effect to the values of the classical model, which is based on the freedom and sanctity of contract, and a view that contracting parties are self-interested. The most significant recent development away from the classical model is the recognition of relational contracts and an implied obligation to act in good faith.
Book
Mindy Chen-Wishart
Contract Law offers a new approach, utilising diagrams and commentary boxes to complement the text. The book explains the intricacies of contract law by reference to the questions that arise during the life of a contract. Part I of the book introduces contract law. Part II looks at contract formation: the finding of agreement and meeting the criteria of enforceability. Part III focuses on the position of third parties who may benefit or be burdened by the contract. Part IV considers the reasons for allowing a party to escape the contract, namely the vitiating factors of misrepresentation and non-disclosure, mistake, frustration, duress, undue influence, and unconscionability. Part V looks at how to determine the contents of contracts: express, implied, and collateral terms, and examines their interpretation and enforceability. Part VI considers the breach of a contract and the availability of the remedies of termination, damages, and specific and agreed remedies. Part VII examines whether obligations of good faith should be recognised in current contract law and how that might affect the way we understand contract law.
Chapter
15. Good faith
English law does not currently recognise a duty of good faith, but whether it should in the specific context of contractual performance, or in contract generally, has attracted increasing discussion in case law and commentaries. In addition, good faith informs a diverse range of legal doctrines and principles. This chapter discusses: (1) the meaning of good faith; (2) the pros and cons of recognising good faith; (3) three different models of good faith; (4) the nature of good faith; (5) the taxonomy of good faith in current contract law; and (6) the difference that recognition of good faith might make to various aspects of the law.
Chapter
5. Misrepresentation and non-disclosure
In general, contract parties need not disclose important matters about the transaction to each other. But, those who make false statements to induce the other party’s consent to the contract may find themselves liable for damages for misrepresentation and their contracts set aside. This chapter examines: (1) what must be proved in an action for misrepresentation; (2) what, if any, duty is imposed for non-disclosure; (3) when a contract can be set aside (rescinded) for misrepresentation; (4) the different types of money awards that can be made for misrepresentation; (5) the extent to which the parties can exclude or limit liability for making a misrepresentation; (6) the recourse that consumers have against misleading and aggressive practices; and (7) the justifications underlying the remedies for misrepresentation.
Chapter
4. Certainty
Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter examines the certainty requirement in contractual formation and discusses the factors that influence the courts in deciding whether an agreement possesses the requisite degree of certainty, in the context of issues such as agreements to agree, agreements to negotiate in good faith, and agreements to use reasonable or best endeavours to negotiate or agree.
Chapter
Additional Chapter Principles of Insurance Law
Put broadly, insurance is a contractual process whereby risk is transferred from a person who might incur a loss to an insurer. Whilst insurance law is at root merely an example of applied contract, in fact it has some unique characteristics and practices and a terminology all of its own. In this chapter we will consider the key characteristics of insurance law. After examining the meaning of insurance, including the concepts of indemnity and insurable interest in liability and property insurance, we move to the structure of insurance policies. The ways the courts have interpreted insurance wordings and insurance warranties, conditions precedent, and basis of the contract clauses are dealt with before the extensive reforms wrought by the Insurance Act 2015 are introduced. Insurance policies, even so-called all risks policies, do not cover all causes of loss which an insured might suffer, so the concept of causation in insurance is particularly important and this is dealt with next. The chapter closes by reviewing insurance claims, including the effect of fraudulent claims, how the level of disclosure expected of an insured is far higher than in a non-insurance context, and how these issues have been the subject of substantial reform under the newInsurance Act.
Chapter
15. Decision-Making
This chapter explains how an LLP makes decisions, identifying the sorts of decisions that require unanimity and the sorts of decisions that can be decided by a majority. It considers how a decision-making power must be exercised, and the extent to which fetters such as good faith, rationality and natural justice will impact on the decision-making process. Lastly, it considers what the consequences of an unlawful decision are.
Chapter
Armitage v Nurse [1998] Ch 241, Court of Appeal
Essential Cases: Equity & Trusts provides a bridge between course textbooks and key case judgments. This case document summarizes the facts and decision in Armitage v Nurse [1998] Ch 241, Court of Appeal. The document also includes supporting commentary from author Derek Whayman.
Chapter
19. Articles 16–18: Other Restrictions upon the Rights Protected
David Harris, Michael O’boyle, Ed Bates, Carla M. Buckley, KreŠimir Kamber, ZoË Bryanston-Cross, Peter Cumper, and Heather Green
This chapter discusses Articles 16–18 of the European Convention on Human Rights. Article 16 allows potentially wide-ranging interference with the political rights of aliens. Article 17 aims to prevent totalitarian or extremist groups from justifying their activities by relying on the Convention. Article 18 concerns misuse of powers or breaches of the principle of good faith, and must be applied in conjunction with another Convention’s Article(s).
Chapter
Armitage v Nurse [1998] Ch 241, Court of Appeal
Essential Cases: Equity & Trusts provides a bridge between course textbooks and key case judgments. This case document summarizes the facts and decision in Armitage v Nurse [1998] Ch 241, Court of Appeal. The document also includes supporting commentary from author Derek Whayman.
Chapter
19. Articles 16–18: Other restrictions upon the rights protected
David Harris, Michael O’Boyle, Ed Bates, and Carla Buckley
This chapter discusses Articles 16–18 of the European Convention on Human Rights. Article 16 allows potentially wide-ranging interference with the political rights of aliens. Article 17 aims to prevent totalitarian or extremist groups from justifying their activities by referring to the Convention. Article 18 concerns misuse of powers or breaches of the principle of good faith, and must be applied in conjunction with another Convention’s Article(s).
Book
Paul S. Davies
Driven by exposition of the leading cases, JC Smith’s The Law of Contract offers the perfect balance between accessibility and authority. The strong focus on cases guides the reader through the intricacies of contract law with expert analysis ensuring key points are clear. The text begins with an introduction to contractual rights and duties. It looks at objectivity in contract law, the formation of bilateral and unilateral contracts, contract as agreement, offeror and offeree, estoppel, legal relations, and the role of third parties. It also considers the terms of the contract, interpretation of the contract, implication and rectification, and exclusion clauses and unfair terms. It goes on to look at issues such as duress, undue influence, good faith, capacity, illegality, contractual assumptions, breach of contract, remedies and damages, and remedies beyond compensatory damages.
Chapter
21. Capacity
This chapter discusses the issue of capacity. The general rule is that contracts are valid but unenforceable on minors (persons under 18 years of age). However, they are enforceable against adults, and a minor can ratify a contract upon attaining the age of majority so that the contract is enforceable against both parties. At common law, mental incapacity is not by itself a reason to set aside a contract. But if the other party knows, or ought to know, of the mental incapacity, then the contract can be set aside. The Mental Capacity Act 2005 makes it clear that a person who lacks capacity must still pay a reasonable price for necessary goods and services.
