Contract Law
Introduction
Unlike other civil law legal systems, such as the German one and the American one, United Kingdom’s (UK) and Hong Kong’s (HK) do not recognize the approach of general principle of good faith in contract law, as illustrated in Walford v Miles1. Yet, good faith should be promoted in UK and HK because one should value fairness in the whole course of dealing, from the point of pre-contractual negotiations till the discharge of he contracts. This essay aims at showing the merits of a good faith doctrine and possible implications on the UK and HK legal system so as to ensure fairness throughout the contractual relations
A general principle of good faith
A general principle of good faith can be applied to negotiation and performance of contracts. ‘Good faith’ in the law of contract presumes that both parties in a contract should deal with each other honestly and fairly. It is defined in the US legislature that ‘good faith’ equals to ‘factual honesty’2. In Interfoto Picture Library v Stiletto Visual Programmes Ltd3, Bingham L.J. affirmed that ‘good faith’ is essential to a fair and open dealing and therefore by acting in good faith, a higher degree of business efficacy will be the results. Unfair dealings will be effectively deterred upon adopting the doctrine of good faith and contractual parties will be more ‘protected’.
The current position in UK and HK
Nevertheless, English law currently holds a negative view towards the concept of good faith. In Walford v Miles4, the court rejected to impose a duty of good faith in agreement to negotiate, with reasons being two-fold, the freedom of contract and the uncertainties brought about by doctrine of good faith.
First and foremost, the freedom of contract means that each party is entitled to decide who he would contract to and which terms to contract he would decide. Therefore, they can exercise their autonomy to pursue their utmost interest without any interference. The imposition of good faith would
Unlike other civil law legal systems, such as the German one and the American one, United Kingdom’s (UK) and Hong Kong’s (HK) do not recognize the approach of general principle of good faith in contract law, as illustrated in Walford v Miles1. Yet, good faith should be promoted in UK and HK because one should value fairness in the whole course of dealing, from the point of pre-contractual negotiations till the discharge of he contracts. This essay aims at showing the merits of a good faith doctrine and possible implications on the UK and HK legal system so as to ensure fairness throughout the contractual relations
A general principle of good faith
A general principle of good faith can be applied to negotiation and performance of contracts. ‘Good faith’ in the law of contract presumes that both parties in a contract should deal with each other honestly and fairly. It is defined in the US legislature that ‘good faith’ equals to ‘factual honesty’2. In Interfoto Picture Library v Stiletto Visual Programmes Ltd3, Bingham L.J. affirmed that ‘good faith’ is essential to a fair and open dealing and therefore by acting in good faith, a higher degree of business efficacy will be the results. Unfair dealings will be effectively deterred upon adopting the doctrine of good faith and contractual parties will be more ‘protected’.
The current position in UK and HK
Nevertheless, English law currently holds a negative view towards the concept of good faith. In Walford v Miles4, the court rejected to impose a duty of good faith in agreement to negotiate, with reasons being two-fold, the freedom of contract and the uncertainties brought about by doctrine of good faith.
First and foremost, the freedom of contract means that each party is entitled to decide who he would contract to and which terms to contract he would decide. Therefore, they can exercise their autonomy to pursue their utmost interest without any interference. The imposition of good faith would