Good Faith in Contract Law

Legal systems around the world have struggled with the role that good faith should play in the law of contracts since ancient Rome.  In common law Canada, good faith has recently emerged as a general organizing principle of contract law, where it functions as a prominent feature of transactional planning and commercial disputes.  Nevertheless, fundamental tensions between good faith and other organizing principles of contract law continue to remain, including freedom of contract and commercial certainty.  These tensions have provoked a variety of responses across different jurisdictions, making good faith a fascinating subject for comparative contract law and legal theory, along with a matter of great practical importance for solicitors and litigators alike.

This class provides a comprehensive overview of the organizing principle of good faith in contracts, using seminal cases to identify and illustrate its implications.  The major areas of study include:

• The situational duties of good faith performance: honest performance, the reasonable exercise of contractual discretion, the non-evasion of contractual obligations, and cooperation to achieve the objects of the contract
• Relational duties of good faith performance, as in employment and insurance contracts
• Whether a duty to negotiate contracts in good faith exists, particularly in negotiations under pre-existing and preliminary agreements
• The pervasive role that good faith plays within contractual formation, such as through doctrines that prohibit dishonesty, exploitation and gross disproportionality
• The relationship between good faith and contractual interpretation
• Remedies for conduct contrary to good faith

Along the way, the class will discuss a number of themes, including the role of context in contract law; the distinction between principles and rules; and the definition of standards like honesty and reasonableness.