Law 5110 Study Guide - Quiz Guide: Uberrima Fides, Fiduciary, Parol Evidence Rule
The principle of good faith
All civil codes adopt a provision on this principle.
Subjective good faith: refers to a subjective state of mind of a person who doesn’t know nor has
reason to know of a certain fact, and therefore acts in good faith.
Objective good faith: entails reasonableness and fairness as a norm for the contracting parties. It
sets a standard of conduct that requires each party to take the interests of the other party into
account.
3 functions of good faith in civil law:
1. Supplementing function: allows a court to fill gaps in the party agreement.
2. Interpretative function: it is primarily a duty of the parties to give a meaning to the
contractual terms that fit their common goal. The rule that interpretation must be in lune
with how reasonable parties would construe the contract also follows from the standard
of good faith.
3. Restrictive function: to restrict the exercise of contractual rights. It allows a party to
escape from a binding contract. Restrictive function can also come into place through the
doctrine of unforeseen circumstances/hardship (not accepted in French and English law).
English law: no general principle of good faith
English law regards the need to take into account the interests of the other party in any type if
contract as contrary to the very nature of contracting.
Arguments against good faith:
1. Good faith requires the parties to take into account the legitimate interests of one another,
which would go against the individualistic and liberal ethic of English contract law.
2. Good faith would be too vague; this threatens legal certainty.
3. Even objective good faith sometimes still requires an inquiry into the state of mind of the
parties because it is dependent on the reasons why a party acted in a certain way.
4. Good faith impinges on the autonomy of the contracting parties. This is inconsistent with
the freedom of contract.
5. It fails to recognise that contracting contexts are not all alike.
There are 3 ways through which good faith enters English contract law:
1. English law adopts several doctrines that are similar to good faith.
2. Good faith is explicitly recognised as an important norm in some special contracts and
relationships (contracts uberrimae fidei aka of the utmost good faith) and in relationships
that are considered to be governed by good faith (fiduciary relationships)
3. The uk has adopted good faith in consumer contracts (European directive on unfair terms
in consumer contracts).
Policing unfair contract terms
Exemption clause: a clause that limits or excludes the possibility to claim performance or
damages.
General controls
The use of general conditions is not without problems. There are 3 problems in particular:
1. Incorporation problem: it’s not self-evident how a set of rules drafted by one party can
become part of an individual contract with somebody else who was not involved in the
drafting.
Document Summary
All civil codes adopt a provision on this principle. Subjective good faith: refers to a subjective state of mind of a person who doesn"t know nor has reason to know of a certain fact, and therefore acts in good faith. Objective good faith: entails reasonableness and fairness as a norm for the contracting parties. It sets a standard of conduct that requires each party to take the interests of the other party into account. The rule that interpretation must be in lune with how reasonable parties would construe the contract also follows from the standard of good faith: restrictive function: to restrict the exercise of contractual rights. It allows a party to escape from a binding contract. Restrictive function can also come into place through the doctrine of unforeseen circumstances/hardship (not accepted in french and english law). English law: no general principle of good faith.
