What is good faith?

The requirement for good faith arises in a number of contexts:

• As an implied term in a contract arising by:
  • proper construction of the agreement eg. insertion of the term “reasonable”
    • Renard Constructions (ME) Pty Ltd v Minister for Public Works ¹⁾
  • law in specific contracts eg. employment, franchise
  • statute
    • Insurance Contracts Act 1984 (Cth), s13
    • UNIDROIT Principles of International Commercial Contracts, Articles 1.7, 4.8, 5.1.2, 5.3.3, 5.3.4, 6.2.1, 6.2.2, 6.2.3
    • United Nations Convention on the International Sale of Goods 1980, Article 7
      • Adopted Sale of Goods (Vienna Convention) Act 1986 (NSW)
    • Uniform Commercial Code (US), 1-201, 5-102, 1-302, 1-304
    • Restatement of the Law Contracts 2d s205
  • What are its terms?
    • Depends on construction
    • It could mean honestly which could mean not dishonesty….
    • Does it mean an obligation to subrogate ones' interest to another? - unlikely that would be a fiduciary obligation.
    • Does it mean an obligation to consider the impact on another - unlikely.
    • Tomlin v Ford Credit ²⁾
• In contract negotiations
  • (generally) Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd ³⁾
  • (mediation)
    • Farm Debt Mediation Act 1994 (NSW)
      • Waller v Hargraves Secured Investments Ltd ⁴⁾
• In contract performance
  • (generally) Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd ⁵⁾
  • (generally) Griffith CJ in Butt v McDonald ⁶⁾
    • It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.
• In the exercise of rights, powers and discretions
  • eg termination Burger King v Hungry Jacks Pty Ltd ⁷⁾
  • eg expert determination clauses Lipman Pty Ltd v Emergency Services Superannuation Board ⁸⁾ Allsop P, Young JA, Tobias AJA

It can be excluded in some circumstances

• Vodafone Pacific v Mobile Innovations Pty Ltd ⁹⁾