US Uniform Commercial Code

Should English Law Recognise a Duty to Bargain in Good Faith? As Brownsword12 suggests, English law is predicated on adversarial self-interest dealing. Fundamentally, a degree of 'bad faith' is essential to a profit-making capitalist economy. If parties were bound to disclose all material information before contracting, there would be no incentive to obtain that information in the first place.

Without market information, exchanges take place at a sub-optimal level and resources do not efficiently migrate to where they are most needed. Lock Ackner in Walford v Miles dismissed 'good faith' as "inherently repugnant to the adversarial position of the parties"13. Anthony Kronman14 suggests a work-around, by requiring general disclosure of information except where resources have been expended to acquire it. Although the economics of this are sound, in practice distinction would be impossible and therefore unenforceable.

A more convincing rebuttal of the above would be to perceive 'good faith' in its moral context: a norm predicated on the 'reasonableness' of the contemporary ordinary man. When applied in a capitalist state, therefore, 'reasonableness' takes on a meaning which accepts 'bad faith' capitalist profiteering but does not extend to sharp practice or anti-competitive activities which threaten market integrity. This way we can reconcile optimal exchanges with moral principles.

This perhaps explains why a general principle of good faith has been operable in Italy and Israel: both states with economies not unlike our own. Note also, as Hugh Collins points out15, that the law frequently regulates self-interested action (for example, where it causes direct physical harm to another). Advocating non-interference in self-interest action is therefore an exception to the law, rather than a continuation. Another criticism levelled at the 'good faith' principle is that it is too vague, and this will lead to legal uncertainty.

On the contrary, however, a patchwork of smaller doctrines each with complicated limits and exceptions in all probability creates far greater uncertainty that a single umbrella doctrine with well-trodden boundaries. This greater doctrinal approach allows judges to 'fill in the gaps' where a situation is not covered by an existing solution, and also dispenses with the temptation to create bad precedent to reach a fair and just result in a particular case. Of course this gives greater liberty to judges by widening the scope of their powers, but is a world apart from judicial licence.

This widening of judicial powers provokes a further response that general principles imposing duties in pre-contractual negotiations undermines the autonomy of parties to decide whether or not to contract, impairing their ability to 'shop around' and formulate Pareto exchanges, and thereby lowering the productivity of the market. This reasoning fails, however, to take account of the power of a general 'good faith' principle to increase parties' faith in one another, encouraging them to move away from defensive dealing within a limited class of trusted associates.

To this end, it has the utility of liberating market exchanges, thereby making them more efficient. Finally, 'good faith' is criticised because it fails to recognise the plurality of contractual contexts, noting that in some markets, opportunism is openly tolerated. Here again, we can counter by suggesting that a general principle better equips the courts to respond to variable contexts and rule in accordance with the reasonable expectations of the parties.

Lord Steyn16 notes that 'good faith' carries both an objective standard (reasonableness and fairness) and a subjective standard (the expectations of the parties) giving it both the flexibility and normative qualities needed to govern this aspect of commercial life. IV Conclusion We have seen that a general 'theme' of good faith pervades the current law, but not a principle nor a duty. Hugh Collins17 summarises it as a 'duty to negotiate with care' which alternates dependent on the context of the parties' relationship.

The 'piecemeal' approach has created legal uncertainty, and in some cases, unjust results. We have analysed the arguments put forward against a duty to negotiate in good faith, and found them largely defective when closely scrutinised. Imposing such a duty will liberalise markets, largely increase efficiency and further the consistency of application of the law. Lord Steyn notes that "in the new jus commune of Europe there is a general principle that parties must negotiate in good faith"18.

It features in the Unidroit Principles of International Commercial Contracts and the US Uniform Commercial Code. As a centre of international commerce, therefore, it is doubtful that English law can continue to resist the spread of the duty to negotiate in good faith. Peter Brogden.


Statutes Consumer Credit Act 1974 Trade Descriptions Act 1968 Unfair Terms in Consumer Contracts Regulations 1993 Cases Attorney-General v Blake [2001] 1 AC 268