Skip to content

What is good faith?

06/12/2010

A Court has defined what “ good faith” means.  A contract committed the parties to “ at all times deal with each other in good faith” and required them to do specific things “in good faith”.

The Court explained that those obligations do not depend on the parties’ subjective intentions.   What the parties thought the words meant is irrelevant.  Instead,  the words mean what a reasonable person would objectively understand them to mean.  In working out their meaning, the contract must be read as a whole and the factual background considered.  The phrase “in good faith” is not legal  jargon or a term of art used in a technical way. The words should be given their natural and ordinary meaning which dictionaries define as “ honesty of purpose” or “honesty of intention in entering in engagements”.

The full bench approved a statement ((2000) 116 LQR 66) by Sir Anthony Mason that the “concept of good faith embraced three related notions, namely:

1) an obligation on the parties to cooperate in achieving the contractual objects (loyalty to the promise itself);

2) compliance with honest standards of conduct; and

3) compliance with standards of conduct which are reasonable having regard to the interests of the parties.”

Read the scholarly judgement in Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd

Advertisements
One Comment leave one →
  1. 30/12/2010 10:15 am

    I came across your article, i think your blog is interesting, keep us posting.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s