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Understanding Good Faith in Commercial Contracts: Key Principles and Legal Cases

In today's session, we examine the concept of good faith in commercial contracts, focusing on its extent and limitations under English law. We'll recap the key principles discussed in previous lectures, analyze landmark cases such as Walford v Miles and Multiplex Constructions v Cleveland Bridge, and explore the nuances of good faith negotiations. Please remember that essays are due today by 1730 BST! Engage in group discussions on various contract law scenarios, and share your insights on the enforceability of good faith clauses.

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Understanding Good Faith in Commercial Contracts: Key Principles and Legal Cases

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Presentation Transcript

  1. LL202 Commercial Contracts Chris von Csefalvay

  2. Agenda for today • Session 5: Good faith • Recap • Good faith: extent and limits • Searching for Ariadne’s thread • Note please: ESSAYS DUE TODAY 1730 BST! E-mail to chris@chrisvoncsefalvay.com

  3. Recap • 1 thing you remember from the lecture. • 1 thing you did not understand about what was said in the lecture.

  4. 1 thing you SHOULD have remembered… • The general principle: no duty of good faith in English law. • No duty to negotiate: Walford v Miles [1992] 2 AC 128

  5. Valid lock-outs • JSD Corp Pte v Al Waha Capital PJSC [2009] EWHC 3376 (Ch): “determinable and reasonable duration” • Determined from an objective matrix of circumstances (okay… how?)

  6. Best endeavours clauses • Performance • Normally does not mean more than the standard adopted by a reasonable and prudent contractor (e.g. IChemE Red 13.1) • Negotiation • Little v Courage [1995] CLC 164 (CA): adding ‘best endeavours’ to an obligation to agree made no difference… it’s still unenforceable. • Multiplex Constructions v Cleveland Bridge [2006] EWHC 1341 (TCC): per Jackson J, reasonable endeavours to agree to renegotiate a works plan not enforceable

  7. Petromec v Petrobras • Per Longmore J: It would be a “strong thing to declare unenforceable a clause into which the parties have deliberately and expressly entered” – it would frustrate the intentions of honest men. • Recent approach: • Appeal against Longmore J’s dictum allowed • Barbudev v Eurocom[2012] EWCA Civ 548 – unenforceable • Shaker v Vistajet Group Holdings [2012] EWHC 1329 (Comm) - unenforceable

  8. However… • For misleading statements • Equitable rescission • Damages • Fraud/deceit • Negligent misstatement if responsibility assumed (Hedley Byrne liability) • Statutory misrepresentation • Collateral warranty • Failure to disclose information

  9. Breach of fiduciary duty • Continental analogy: uberrimaefidei • JPMorgan Chase v Springwell

  10. So, do these exceptions… • …show pockets of case law randomly littered about? • …show a cogent principle, which is that…? • …show a general idea of restitution/unconscionability?

  11. Reasons for the rule • How persuasive do you find any of these? • Which of them is the worst? • Which of them is the best? • Group exercise, 5’.

  12. Classroom discussion of questions • Please discuss each question in your group for five minutes. • Please present your findings.

  13. End of session 5 See you tomorrow morning in the same place. – Please do the recommended readings and think about the questions. ESSAYS DUE TODAY 1730 BST! E-mail to chris@chrisvoncsefalvay.com

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