The Principle of Good faith in English Contract Law: Walford v Miles

Revisited.
Rahul Goswami
https://www.academia.edu/17143244/The_Principle_of_Good_faith_in_English_Co
ntract_Law
Introduction.
Without a principle of good faith , a judge might , in particular cases , be unable to
do justice at all , or he might be able to do it only at the cost of fictionalizing existing
legal concepts and rules, thereby snarling up the law for future cases. In begetting
snarl, fiction may introduce inequity, unclarity or unpredictability. In addition, fiction
can divert analytical focus or even cast aspersions on an innocent party. 1
An Englishman's word is his bond, subject of course to offer and acceptance,
consideration and intention to create legal relations. The doctrine of contractual
enforceability is not merely a legal axiom; it is central to the efficient functioning of
business. The ability to enforce a negotiated bargain can function, at the lowest level,
as a means of reducing the supervision which might otherwise be required to oversee
performance of the agreement and at the highest level may well be a sine qua non to
the making of the bargain itself. The courts have been willing to allow a party to
refuse to perform its contractual obligations on the grounds of public policy for
example, where fraud is present or by reason of illegality.
However, with limited exceptions, the courts have traditionally attempted to give
legal effect to the intentions of businessmen; in a commercial bargain made between
commercial men, the court should seek to give effect to the intentions of the parties

Advocate , Supreme Court of India , LLM (University of Sheffield); Email-rahulgosw@gmail.com

Robert Summers, Good faith in general contract law and the Sales Provisions of the Uniform
Commercial Code (1968) 54 Vir LR 195,198-199.
1

as expressed 2 courts should not play the destroyer of bargains. 3 Many English
commentators believed that the trend in English law was towards the imposition of
pre-contractual liability for bad-faith negotiating, but the House of Lords decision in
Walford v. Miles 4 made it clear that English law remains the exception in refusing to
impose liability during the pre-contractual process, even where parties to a future
contract expressly impose it upon themselves in a pre contractual document like a
letter of intent. Is Walford v Miles5 the last word on the contract to negotiate? Perhaps
not, the decision has been criticized as expressing the "increasingly anachronistic"
position of English law in foreclosing the role of good faith in the pre-contractual
stage of a contract negotiation. 6
The 'good faith issue' is both controversial and complex. It does not admit of a simple
(single) answer. The reality is that to debate the good faith issue a number of
questions must be considered. The issue may arise in a variety of contexts, and the
perspective varies according to the particular context in which the issue is raised. The
good faith issue may arise in the negotiation of contracts, in their performance or in
their enforcement. This essay will deal with good faith mainly in the context of
contractual negotiations which break down at times, as seen in the case of Walford v
Miles 7, what have been the traditional view of good faith.

Is it, that there is no

general duty of good faith in English Contract law?

Didymi Corporation v Atlantic Lines and Navigation Co Inc [1988] 2 Lloyd's Rep 108, 110 per Bingham
LJ.
3
Mallozzi v Carapelli SpA [1976] 1 Lloyds Rep. 407 p 412
4
(1992) 1 All E.R . 453(HL)
5
ibid
6
In Radiant Shipping Co. v. Sea Containers Ltd., 1993 Court of Appeal (Civ. Div.), the Court of Appeal had
no difficulty in enforcing an obligation to pay the costs of a party upon the termination of negotiations in an
otherwise unenforceable agreement to negotiate. In Little v. Courage Ltd., T.L.R. Jan. 19, 1994, the court
held "with a good deal of regret" that Walford v. Miles compelled the invalidity of a provision of a public
house lease which granted the lessee the option to renew provided "the Lessee shall have agreed with [the
lessor] a further Business Plan and a further Business Agreement." An argument that the provision at least
required the lessor to produce and enter into "a new Business Plan in a form to be determined by the
[lessor] acting reasonably" was rejected.
7
(1992) 1 All E.R . 453(HL)
8
Raphael Powell, 'Good Faith in Contracts' [1956] CLP 16 at 25;
R M Goode, 'England', in International
Chamber of Commerce, Formation of Contracts and Pre contractual Liability, ICC Publishing Corp, New
York, p 51;
J F O'Connor, Good Faith in English Law, Dartmouth, Aldershot, 1990, p 18

The essay also analyses concerns that adoption of a broad duty of good faith could
unsettle the commercial bargaining process, and that a court should not, in
commercial matters, substitute lawyerly conscience for the hard-headed decisions of
business people. 9 The essay will also investigate both the extent to which the law
promotes good faith and the extent to which the law requires the exercise of good
faith. Since we do not have up to date empirical evidence on how far commercial
people rely on, or engage in, good faith negotiations, we must look mainly to the
decided cases and statute law for guidance.
Walford v Miles Revisited.
The House of Lords in Walford v Miles10 maintained the approach which has existed
in England since the 1975 decision in Courtney & Fairbairn Ltd v Tolaini Bros
(Hotels) Ltd,11 where it was held by the Court of Appeal that "the law ... cannot
recognise a contract to negotiate. 12
Walford v Miles13 was concerned with negotiations between parties for the sale of a
photographic processing business in London. Walford wished to purchase Miles
business and during negotiations the two came to an arrangement. Walford agreed to
provide a comfort letter from a bank in respect of the purchase price in return for
which Miles agreed to terminate negotiations with any third party and not to consider
any further proposals from other third parties. Despite the arrangement, Miles sold the
business to a third party. Walford then brought an action against Miles for breach of
their agreement.
The House of Lords noted that ordinarily this would constitute what is called a lockout agreement, which is enforceable provided that the duration of the lock-out is
certain. A lock-out agreement, it was observed, is a negative agreement, whereby
9

Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 585 per Kirby P. & also Roger
Brownsword, 'Two Concepts of Good Faith' (1994) 7 JCL 197.
10
(1992) 1 All E.R . 453(HL)
11
[1975] 1 All ER 716.
12
Ibid. at 720
13
(1992) 1 All E.R . 453(HL)

one person promises another that he will not negotiate, for a fixed period, with any
third party.
The House of Lords found that the agreement in this case was not enforceable. The
lock-out agreement was missing two essential elements which it required to be
enforceable. The first was that it did not specify for how long the lock-out was to last;
the second was that in the absence of any term in the agreement as to its duration, it
did not contain a provision which would allow Miles to determine negotiations.
Walford argued that in order to give the agreement business efficacy there must be an
implied term that Miles would continue to negotiate in good faith. Further, because it
was not specified in the agreement for how long the negotiations would continue,
Walford contended that the obligation on Miles to negotiate must endure for as long
as was reasonably necessary for parties negotiating in good faith to reach a binding
agreement (that is, until there is a proper reason to withdraw).
The House of Lords held that the lock-out agreement could not be enforced if
enforcement required the existence of either a direct or indirect implied agreement to
negotiate in good faith. Lord Ackner (with whom the other Lords agreed) observed
generally, The reason why an agreement to negotiate, like an agreement to agree, is
unenforceable is simply because it lacks the necessary certainty.

14

Further, Lord

Ackner noted:
A duty to negotiate in good faith is as unworkable in practice as it is inherently
inconsistent with the position of a negotiating party. It is here that the uncertainty
lies. In my judgment, while negotiations are in existence either party is entitled to
withdraw from these negotiations, at any time and for any reason. There can thus be
no obligation to continue to negotiate until there is a proper reason to withdraw.
Accordingly, a bare agreement to negotiate has no legal content. 15

14
15

Walford v Miles [1992] 1 All ER 453 at 460

Ibid. at 461

Earlier in16 a lucid dissenting judgment, Bingham L.J. emphasised that the courts
would strive not to invalidate a provision for uncertainty and would, wherever
possible, uphold commercial practices. He considered the lock-out arrangement to
be a separate undertaking which was not part of the continuum of negotiations which
were subject to contract, rather it related to the machinery for conducting the
negotiations. As such its terms were to be construed as negative in content, the
defendant agreeing not to deal with any party other than the plaintiffs. His Lordship
considered that:
If any obligation by either party to negotiate is disregarded as legally ineffective,
there remains a clear undertaking by Mr. Miles on behalf of himself and his wife,
conditional on timely production of a comfort letter, not to deal with any party other
than the plaintiffs and not to entertain any alternative proposal. If this undertaking
was supported by consideration moving from the plaintiffs as promisees and was
sufficiently certain to be given legal effect, I see no reason why it should not form
part of a legally enforceable contract. 17
Although no time limit was prescribed for this lock-out, Bingham L.J. saw no
obstacle in its remaining in force for a reasonable time which would end if the parties
reached a genuine impasse. On the facts, he was unable to accept that the
defendants reasons for ending the negotiations (which were never communicated to
the plaintiffs) could be an impasse bringing the plaintiffs period of exclusivity to an
end. This reasoning would, of course, indirectly subject the parties to a duty to
negotiate in good faith but Bingham L.J. did not view this as an obstacle since it is
without doubt what the parties intended should happen.18 He unequivocally accepted
the weight of authority which precluded any finding of a valid contract to negotiate in
good faith but, although acknowledging the difficulties inherent in enforcing such a
contract, he was not ... persuaded that the concept was impossible. His Lordship
continued:
16

In the Court of Appeal , [1991] 2 E.G.L.R. 185

[1991] 2 E.G.L.R. 185, p. 188, paras. L-M.
18
Ibid. p. 189, paras. D-E.
17

If such a contract were recognised, breach could not of course be demonstrated

merely by showing a failure to agree, and if negotiations were shown to have broken
down it might be necessary for the court to decide whether the parties had reached a
genuine impasse or whether one or the other party had for whatever ulterior reason
aborted the negotiation. This could be hard to decide, but no harder than other
matters which regularly fall for judicial decision. 19
The House of Lords tried to make a clear distinction between lock-out and lock-in
agreements. It was held that a negative lock-out arrangement could be enforceable if
it provided expressly for the duration of the lock-out and was supported by
consideration but that the parties could never be locked-in to positive negotiations
by such a contract as it would amount to an uncertain and unenforceable contract to
negotiate. Moreover, there could be no implied term to negotiate positively subsisting
for a reasonable period of time in a lock-out contract. Lord Ackner thus decided
that an agreement to negotiate positively was not recognised by English law. He
thought that the inherent difficulties were that the parties could be under no absolute
obligation to finalise a contract and neither would know when he could legitimately
end the bargaining. Moreover, he emphasised that a court could not police such an
agreement as it would be impossible to decide whether there were, on the facts,
proper reasons for terminating the negotiations. The possibility of good faith being
the pivotal determinant factor in negotiations was vilified by Lord Ackner in the
strongest terms: 20
How can a court be expected to decide whether, subjectively, a proper reason
existed for the termination of negotiations? The answer suggested depends upon
whether the negotiations have been determined in good faith. However, the concept
of a duty to carry on negotiations in good faith is inherently repugnant to the
adversarial position of the parties when involved in negotiations. Each party to the
19

20

Ibid. p. 188, paras. F-G.

[1992] 1 All E.R. 453. pp. 460-461.

negotiation is entitled to pursue his (or her) own interest, so long as he avoids
making misrepresentations.
The essence of Lord Ackners reasoning appears to be first, that the duty to negotiate
in good faith is inherently inconsistent with and repugnant to the adversarial
position of the parties when involved in negotiations, and secondly ,that performance
of the obligation cannot be policed. As to the first of these points, it is clear from what
Lord Ackner stated earlier that this inconsistency or repugnancy does not exist if one
party or both parties have undertaken to use their best endeavours to agree. What he
calls the necessary certainty then exists. It also clear that the Privy Council in the
Queensland Electricity Generating Board v New Hope Collieries Pty. Ltd

21

must

have thought that there was no inconsistency or repugnancy involved where the
parties impliedly undertook to make reasonable endeavours to agree. Yet a best
endeavours negotiation or a reasonable endeavour negotiation is still a negotiation.
What the parties do, however, by undertaking to use their best endeavours to impose
reasonable restraint on their adversarial position. 22
Moreover Lord Ackner heavily relied on the Courtney & Fairbairn Ltd v Tolaini
Bros (Hotels) Ltd

23

case , where the reason given by Lord Denning M.R. for a

contract to negotiate in good faith having no binding force is that the court could not
estimate damages because no one could possibly tell whether the negotiation will be
successful or not. This should be contrasted with the case of Allied Maples Group
Limited v Simmons & Simmons

24

where, Hobhouse L.J stated that where parties are

engaged in negotiations on the detailed terms of a commercial deal upon which they
are both agree in principle and from which both are expecting to gain, it is in no way
unrealistic to conclude that meaningful negotiations are possible.
Further, in Walford v Miles Lord Ackner asserted as a law of nature that duty to
negotiate in good faith is unworkable in practice or is inherently inconsistent with
21

(1989) 1 Lloyds Rep. 205

Jamieson, "Lock-Out Agreement is Unenforceable" [1992] L.M.C.L.Q. 16
23
[1975] 1 All ER 716.
24
[1995] 1 WLR 160
22

the position of a negotiating party and it is impossible for the court to police . If that
was correct, one would expect it to hold good for other cases also. But in AT&T
Corp. v Saudi Cable Co.

25

Lord Woolf M.R. accepted that New York law recognises

a contract to negotiate in good faith as a binding contractual obligation.

Putting to one side the 'subject to contract' complication in Walford v Miles, it is
difficult to see who benefits from the decision to apply the rule that an agreement to
negotiate is not in law an effective contract, in cases where there is consideration for
the promise. If businesspeople are prepared to reach such agreements, why should the
law not enforce them? 26
Moreover, it seems that the relevant US cases were not cited in Walford v Miles, the
only case that was cited was Channel Home Centers, Division of Grace Retail Corp.
v Grossman

27

which Lord Ackner was able to distinguish because it concerned an

obligation to use best endeavours, as opposed to an obligation to negotiate in good

faith. The House of Lords was not referred to Teachers Insurance and Annuity
Association of America v Tribune Company

28

which indisputably concerned an

obligation to negotiate in good faith. The facts were also similar to those in Walford v
Miles, the main terms of the deal had been agreed between the parties on a subject to
contract basis. Teachers Insurance concerned a commitment letter for a loan which
Teachers, as would be lender, sent to Tribune Company as would be borrower. It was
held by the Court that Tribune Company was obligated in good faith to conclude a
final agreement within the terms specified in the commitment letter. 29

25

[2000] 2 All ER (Comm.) 625

Predictably, academic reaction to the decision has been critical. See eg Jeff Cumberbatch, 'In Freedom's
Cause: The Contract to Negotiate' (1992) 12 OJLS 587; Sir Patrick Neil QC, 'A Key to Lock-Out
Agreements?' (1992) 108 LQR 405; Bill Jamieson, 'When Lock-Out Agreement Enforceable' [1992]
LMCLQ 186; J P Swanton, (1992) 66 ALJ 744; R P Buckley, 'Walford v Miles: False Certainty About
Uncertainty -- An Australian Perspective' (1993) 6 JCL 58. Cf Edwin Peel, '"Locking Out" and "Locking
In": The Enforceability of Agreements to Negotiate' [1992] CLJ 211.
27
795 F . 2d . 291 (1986)
28
670 F Supp. 491(1987)
29
Alan Berg , Promises to negotiate in good faith (2003) 119 LQR 357
26

Lord Ackners pronouncement that the concept of a duty to carry on negotiation in

good faith is inherently repugnant to the adversarial position of the parties should
now be understood as expressing a rule of construction. 30 An undertaking to negotiate
in good faith is to be construed as an agreement to renounce purely adversarial
negotiation in the following factual undertaking:
A responsibility to begin negotiation in a clearly defined manner and have the
necessary involvement in the process of contract negotiation.31
An open mind to consider each other suggestion for resolution of any dispute that
might rise in negotiation process or likely to crop up in a later stage of the contract.32
Particularly in terms of valuation, pricing and title rights the parties should not
take undue advantage of each other and keep each other in dark about known fact
which have a direct bearing on the negotiation process. 33
A Compromise in making: The traditional English hostility to good faith and
the present piecemeal solutions in response to demonstrated problems of
Unfairness.
English judges, stubbornly wedded to classical contract doctrine, have been relatively
less considerate (with the notable exception of Lord Steyn) and slow to advance the
doctrines of good faith, estoppel and unconscionability. Instead, it has been mostly
left to Parliament to make necessary reforms.

34

This measured inertia is largely

attributable to the fact that English courts follow a positivist approach to the law,
basing their decisions (and their reasoning) upon the formalism of the doctrine of

30

L S Sealy, Commentary on 'Good Faith and Fairness in Negotiated Contracts(1995) 8 JCL LEXIS 13

31

Cable & Wireless Plc v IBM United Kingdom Ltd [2002] EWHC 2059, [2002] 2 All E.R. (Comm.) 1041
East Devon Health Authority [2001] Q.B. 213
33
Chitty on Contracts (28th ed., 1999) at para.2- 126; also see Lord Hoffmann's dissenting opinion in
BCCI v Ali [2002] 1 A.C. 251 at [68]-[72].
34
See, e.g., Unfair Contract Terms Act, 1977, ch. 50
32

stare decisis rather than upon any broad policy oriented ideas. 35 This accounts for the
traditional dogma that there is no inquiry permissible into the fairness of a bargain by
reference to the adequacy or otherwise of consideration.
The English common law possesses sufficient ingenuity to recognise novel claims
and adapt settled rules in order to ascertain or imply contractual liability. Some recent
cases show a judicial inclination to investigate new avenues of thought.

36

Thus, in

Interfoto Picture Library Ltd. v. Stiletto Visual Programmes Ltd., 37 Bingham L.J. took
the first steps towards combining the technical approach to contract formation with
notions of good faith. In Haines v Carter 38 the Privy Council had to consider a clause
in an agreement drawn up as a result of an informal mediation. The clause recorded
that the parties confirm that they have reached the agreement contained in this
mediation in all good faith. A majority of the Privy Council considered that the
clause was an indication that, in reaching the agreement by means of the mediation,
the parties had been under an obligation to act in good faith. Such adoption of implicit
good faith values was also recognised by the Court of Appeal in Blackpool and Fylde
Aero Club Ltd. v. Blackpool Borough Council

39

where it was held that, by its manner

of advertising and arranging the award of holiday tours contract at the municipal
airport, the Council had implicitly undertaken to comply strictly with its announced
method of analyzing the tenders.
Another leading case in this direction is the House of Lords decision in Director
General of Fair Trading v. First National Bank.
instance stated

41

40

In this Evans-Lombe, at first

that the words good faith in the Regulations were not to be

35

See, e.g., Andrew Phang, Positivism in the English Law of Contract, 55 MOD. L. REV. 102 (1992).
See, e.g. English v. Dedham Vale Properties Ltd. [1978] 1 W.L.R. 93 (Atiyah contends that English
"comes close to imposing a duty of good faith on parties negotiating a contract," An Introduction to the
Law of Contract (4th ed., 1989) p. 109); Blackpool & Fylde Aero Club Ltd. v. Blackpool Borough Council
[1990] 1 W.L.R. 1195; Williams v. Roffey Bros. & Nicholls (Contractors) Ltd. [1990] 1 All E.R. 512.
36

37

[1988] 1 All E.R. 348.

[2002] UKPC 49
39
1990] 1 W.L.R. 1195
40
[2002] 1 AC 481
41
[2000] 1 WLR 98, p 109
38

10

construed in the English law sense of absence of dishonesty but rather in the
continental civil law sense which he understood to be a reference to a principle of fair
and open dealing. This analysis was confirmed by the House of Lords where good
faith was stated to be an objective criterion which imports the notion of fair and
open dealing.
At the same time however, some decisions show a marked tendency to revert to strict
nineteenth century laissez-faire ideals of robust self-reliance and judicial noninterventionism. The closing comments of Ralph Gibson L.J. in Kleinwort Benson
Ltd. v. Malaysia Mining Corp. Bhd.

42

that the consequences of the decision of the

defendants to repudiate their moral responsibility are not matters for this court are
coextensive with Blackburn J.'s statement in Smith v. Hughes

43

that whatever may

be the case in a court of morals, there is no legal obligation on [a] vendor to inform
the purchaser that he is under a mistake, not induced by the act of the vendor.
Further comparison of the facts reveals more than parallelism of thought: Kleinwort is
arguably more supportive of the ideals expressed than is Smith. Similarly, delivering
the judgment of the Court of Appeal in Banque Financire de la Cit S.A v. Westgate
Insurance Co. Ltd.,

44

Slade L.J. stated in the case of commercial contracts, broad

concepts of honesty and fair dealing, however laudable, are a somewhat uncertain
guide when determining the existence of any dishonest or unfair intent.
However, it might be argued that if English Law adopts a doctrine of good faith, it
would impose difficult questions of contractual interpretation and implication in the
context, not only to the background standards of fair dealing, but more immediately
of the concrete expectations of the parties. Such concrete expectation would be based
as much on the ways the parties relate to one another whether they deal with each
other in an adversarial or non-adversarial manner, as on the express provision of the
agreement.

45

To appreciate the significance of this argument, we should consider the

42

[1989] 1 All E.R. 785, 798; see Brown, "The Letter of Comfort: Placebo or Promise?" [1990] J.B.L. 281.
(1871) L.R. 6 Q.B. 597, 607
44
[1989] 2 All E.R. 952. at p. 990.
45
Brownsword Contract Law, Co- operation and Good faith :the Movement from static to dynamic market
individualism in Deakin and Michie(eds) Contracts ,Co-operation and competition : Inter-Disciplinary
Perspective , (1997)
43

11

decision of the Court of Appeal in Philips International

Broadcasting Ltd( hereinafter BSB)

46

BV

v British Sky

where BSB and Philips were locked in a

number of agreements to control the satellite television market in UK. BSB lost the
battle and merged with Sky leaving Philips with a large stock of unsold BSB
receivers and no continuing opportunity to sell the receivers. Philips tried to recoup
their losses by arguing that BSB was in breach of various implied terms in which
BSB committed not to do any act which would impede or render impossible the
marketing of the receivers. Although Philips persuaded the trial judge that such an
implied term was part of the agreement, they failed before the Court of Appeal where
Sir Thomas Bingham MR could not see a clear allocation of risk between BSB and
Philips and what form they would agree the protection should take. In this case, we
find the court willing to speak the language of good faith performance, and yet
apparently respecting the orthodox view that only such terms as can be confidently
attributed to the parties unstated intentions are to be implied. Underlying this
orthodoxy is an adversarial model of each party seeking to maximize its utility. 47

In essence, English law's preference has been to respond to perceived cases of

unfairness by devising piecemeal solutions.48 This explains its refusal to adopt an
explicit overriding requirement of good faith in pre contractual negotiation as seen in
the case of Walford v. Miles.

Conclusion.

46

[1995] EMLR 472

Chitty on Contracts , Vol. 1 29th Edition , Sweet and Maxwell (2004)
48
Ewan McKendrick, English Contract Law: A Rich Past, An Uncertain Future?, 50 CURRENT LEGAL
PROB. 25, 64 (1997). Also generally see Johan Steyn, Contract Law: Fulfilling the Reasonable
Expectations of Honest Men, 113 L.Q. REV. 433, 438, 442 (1997)
47

12

Finally, it is arguable that the beneficial effects of a good faith doctrine go beyond
dispute settlement, for a good faith contractual environment has the potential to give
contracting parties greater security and thus greater flexibility about the ways in
which they are prepared to do business. While English law goes some way towards
meeting the concerns of defensive contractors and to some extent, liberates practices,
it falls short of what is required if the potential synergies of co-operation are to be
fully exploited.
Undeniably, the emergent contours of good faith and related concepts do constitute
the very real chinks in the cold armor of individualism, freedom of contract, caveat
contractor and any other laissez-faire notions in that the contracting parties are not
regarded any longer the autonomous individuals who are the exclusive masters of
their bargains, capable of safeguarding their own interests.
Whether one describes the departure from the classical contracts as monolithic
reverence for freedom of contract as an aspect of social conceptualism,

49

or as

emphasising social control, or as mixed contract, 50 or as cooperative contract, 51

their overall object is to deal with the perceived infirmities in the concept of unbridled
individualism.
In absence of the development of suitable alternatives to formalism, judges and legal
thinkers have increasingly looked to natural law notions of fairness and justice in
response to deeply felt social ideals. These rationales can be distilled from the varying
fact patterns of the cases, involving an intermix of subjective-objective norms:
Subjective principles should be employed where they serve both fairness and policy
and when they do not ... the principles employed will ... typically depend on objective
variables that provide a reliable surrogate for state of mind. 52
49

Karl Klare, Contracts Jurisprudence and the First-Year Casebook, 54 N.Y.U. L. REV. 876, 880-81 (1979)
Jay M. Feinman, Critical Approaches to Contract Law, 30 UCLA L. REV. 829, 834-36 (1983).
51
See generally Douglas K. Newell, Will Kindness Kill Contract?, 24 HOFSTRA L. REV. 455 (1995);
Roger Brownsword, From Co-operative Contracting to a Contract of Co-operation, in CONTRACT AND
ECONOMIC ORGANISATION: SOCIO-LEGAL INITIATIVES,
52
Melvin Aron Eisenberg, The Responsive Model of Contract Law, 36 STAN. L. REV. 1107, 1111-12
(1984);
50

13

In any event, the search for fairness or reasonableness in contracts is not new,
although often the courts recoil from espousing such solutions, because adherence to
a rigid formal rule offers them a convenient, though harsher, answer.
Thus, it seems that the signs of traditional English hostility towards good faith might
be abating. The courts have adopted a more sympathetic stance on a number of
occasions recently

53

and the express references to good faith in the Unfair Terms in

Consumer Contracts Regulation 1999 and the Commercial Agents (Council

Directive) Regulations 1999

54

will require English judges to use the language of

good faith. While English law presently does not recognize a duty of good faith, it can
be very firm in its treatment of those who act in bad faith. Secondly, many if not most
of the rules of English contract law 55 do in fact conform to the notion of good faith. It
has been acknowledged that the foundation of a general rule of good faith can be
discerned in the common law dust but the courts have not been prepared to use these
particular rules as the piles for building the principle of good faith. 56
Moreover, if English law is to embrace international conventions or to play role in the
development of the Principles of European Contract, 57 it must come to grips with the
language of good faith. And in what is now a global economy, it may not be possible
for English contract law to resist the commercial and economic pressure in favour of
an increasingly unified law of contract and unified law of contract will almost
certainly contain a significant role for good faith and fair dealing.

53

See generally Timeload Ltd v British Telecommunication Ltd. [1995] EMLR 472; Balfour Beatty Civil
Engineering Ltd. V Docklands Light Railways Ltd (1996) 78 Build R L 42 p 58 ; and Re Debtors (Nos
4449 and 4450 of 1998) [1998] 1 All ER (Comm.) 149 , p 157-159
54
SI 1993 No. 3053
55
Like contracts uberrimae fidae , promissory estoppel , estoppel by convention and law applicable to
fiduciaries etc.
56
Clarke (1993) , The Common Law of Contracts in 1993: Is there a general doctrine of good faith ?, 23
Hong Kong law Journal 318
57
good faith is a important feature in Convention contracts such as Vienna Convention , the Unidroit
Principles and the Principles of European Contract Law (Article 2.301)

14

Thus good faith could not be used to over rule a case such as Arcos Ltd v E A
Ronaasen & Co.

58

nor to give effect to the agreement of the parties in Walford v.

Miles because contemporary English decisions look increasingly reserved in their

espousal of commercial certainty in derogation of good faith. It is particularly
appropriate to remember Corbin's

59

warning that certainty in the law is largely an

illusion at best, and altogether too high a price may be paid in the effort to attain it.
Walford v Miles ensures that unqualified certainty is engendered by plain denial to
negotiate in good faith, but, on the facts of the case, this conclusion undoubtedly
involves a condonation of bad faith in commercial negotiations rather than mere
application of good faith. The present argument is best reflected by Lord Steyn

60

when he turns to criticise the narrow approach in Walford v Miles, claiming that a
good faith principle is perfectly practical and workable. However, he emphasized that
I have no heroic suggestion for the introduction of a general duty of good faith in
our contract law. It is not necessary to. As long as our courts always respect the
reasonable expectations of the parties our contract law can satisfactorily be left to
develop in accordance with its own pragmatic tradition. .After all, there is not a
world of difference between the objective requirement of good faith and the
reasonable expectations of the parties.

58

[1993] AC 470
Corbin on Contracts (1960), Vol. 3, para. 609, p. 689
60
Lord Steyn, 'Contract Law: Fulfilling the Reasonable Expectations of Honest Men' (1997) 113 LQR 433
p 439.
59

15