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Good faith

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Original languageEnglish
Title of host publicationEuropean Contract Law
Subtitle of host publicationScots and South African Perspectives
PublisherEdinburgh University Press
Pages43-73
Number of pages31
Volume2
ISBN (Electronic)9780748626489
ISBN (Print)9780748624256
DOIs
Publication statusPublished - 1 Jan 2010

Abstract

Good faith is a powerful concept in PECL. Almost from the outset, Article 1:201 PECL declares that “each party must act in accordance with good faith and fair dealing”, and that this “duty” may not be excluded or limited by the parties. Comment A says that the Article “sets forth a basic principle running through the Principles”, while Comment B adds: “Its purpose is to enforce community standards of decency, fairness and reasonableness in commercial transactions.” Even the recognition of parties' freedom to enter into a contract and determine its contents is made “subject to the requirements of good faith and fair dealing” (Article 1:102 PECL). Amongst the various purposes for which the Principles are to be interpreted and developed, “the need to promote good faith and fair dealing” is listed first, ahead of “certainty in contractual relationships and uniformity of application” (Article 1:106 PECL). The constant conjunction in PECL of good faith with fair dealing indicates that overall an objective standard is intended, rather than a subjective one of simple honesty. Comment E to Article 1:201 PECL says: “Good faith” means honesty and fairness in mind, which are subjective concepts. … “Fair dealing” means observance of fairness in fact which is an objective test … There are links to other concepts in PECL. Comment A says that Article 1:201 PECL is a companion to the Article on usages, which makes binding between the parties agreed, established or generally applicable and reasonable usages and practices (Article 1:105 PECL). In this way are ideas about “community standards”, as well as the standards the parties set themselves, articulated in the actual text.

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