Contract Negotiations and the Common Law: A Move to Good Faith in Commercial Contracting?

Classically a duty to negotiate commercial contracts in good faith has been seen as part of the civil, not the common, law world. Common law commercial lawyers have long resisted the lure of “good faith” as a contractual concept, despite engagement with civil law principles in harmonisation projects, by virtue of membership of the European Union and their use in international conventions such as the United Nations Convention on Contracts for the International Sale of Goods (CISG). This paper will examine whether this situation is changing, focusing on two common law jurisdictions—England and Wales and Canada. In England and Wales and the common law of Canada, case-law in the last 10 years has indicated a movement towards acceptance of express and implied duties of good faith in relation to contractual performance, see e.g. Yam Seng Pte Limited v International Trade Corporation Limited [2013] EWHC 111 (QB) and, most recently, Essex CC v UBB Waste (Essex) Ltd (No. 2) [2020] EWHC 1581 (TCC) in England and Wales; Bhasin v Hrynew 2014 SCC 71 and Callow v Zollinger 2020 SCC 45 in Canada. This paper will examine the extent to which these cases may open the way more generally for a duty to negotiate commercial contracts in good faith. It will examine the reception of these cases and whether they indicate (i) greater acceptance of “good faith” as part of contract law thinking and (ii) a possible extension of good faith into the pre-contractual period.

     

射幸合同立法研究

射聿合同的射幸性决定了其订立必须遵循最大诚信原则。射幸合同创设并在当事人间分配射幸性风险时,引发了一些社会问题,需要立法予以规制。判断射幸合同合法性的一般标准是：射幸合同是否严重损害当事人一方利益、他人利益或社会公共利益;某种习俗或习惯法的存在可以推定其社会危害性较轻。根据这一标准,结合不同类型的射幸合同,分别判定其合法性并赋予其不同的法律效果,是未来民法典射幸合同立法的可行选择。     

The Possibility of Lawful Act Economic Duress: Pakistan International Airlines Corp v Times Travel (UK) Ltd

The voidability of a contract procured by ‘economic duress’ is now well-established, but the precise boundaries of the doctrine remain contested. In Pakistan International Airlines Corp v Times Travel (UK) Ltd [2021] UKSC 40, the Supreme Court confronted the longstanding controversy as to whether a threat to perform a lawful act can provide grounds for a threatened party to avoid a contract for economic duress. This note argues that the Court's decision to affirm the existence of ‘lawful act duress’ is welcome. It is further argued that the specific kind of lawful act duress identified by the majority and relevant to determining the appeal, described as ‘deliberate maneuvering via illegitimate means’, provides helpful (and defensible) clarification of the content of this doctrine, and that the Court was correct to hold that the contract in Times Travel was not voidable on this basis.     

Mistakes in Algorithmic Trading of Cryptocurrencies

How should the doctrine of unilateral mistake apply when a programming error results in a buyer's algorithmic trading programme accepting an offer generated by the seller's trading programme to exchange cryptocurrencies at 250 times the current market rate? How should the knowledge element be adapted given that algorithmic trading necessarily means that the traders’ minds were not engaged at the moment the contract was formed? These novel issues came before the Singapore Court of Appeal in Quoine Pte Ltd v B2C2 Ltd. The decision further cautions customers of cryptocurrency exchanges not to assume that they have property rights in the cryptocurrencies held by the exchange and to examine carefully the nature of asset holding arrangement found in the documentation.     

Alive and well: the good faith principle in Turkish contract law

Good faith is a principle prominent in civil law countries but less so in common law countries, and which allows courts to deviate from black letter law. It provides them with flexibility to change the outcome of a deductive legal decision if they regard it as absurd. The principle of good faith thus empowers the judiciary to deviate. It can be used for an indefinite number of cases and might lead to almost all conceivable legal consequences. For instance, the judge can invalidate the contract, change the price, suspend or change a clause in the contract, or grant injunctive relief, compensation of damages, the disgorgement of profits or a removal claim. We argue that if the principle of good faith is used to develop contract law into an instrument for redistributing wealth in favor of poor parties, this can destroy the concept of contract as a social mechanism for generating mutual gains for parties, which might lead to unwanted economic consequences in terms of efficiency losses. We argue that the principle of good faith must be carefully and reluctantly used to reconstruct the fully specified contract and that well-informed judges, who understand the factual environment of a contract well should ask how fair bur self-interested parties would have allocated the risk in a pre-contractual situation. If the courts restrict the application of the good faith principle to these functions, this provides elasticity that otherwise would not exist if courts would strictly use the rules laid down in black letter law. Moreover, it saves transactions costs and is therefore in line with economic reasoning. We look at the most important Turkish cases and find that the Turkish Supreme Court following Continental European doctrines of good faith actually uses this principle to curb opportunistic behavior of parties and not to achieve redistribution from the rich to the poor by way of interfering into contract law.     

(Non‐)Enforcement of Directors’ Duties in Corporate Groups: Goh Chan Peng v Beyonics Technology Ltd

Corporate groups, a ubiquitous feature of modern business, pose formidable challenges for common law courts relying on traditional corporate law doctrine. Arising out of a corporate group's recent bid to recover millions of dollars in lost profits from a former director and CEO who had diverted a core business, Goh Chan Peng v Beyonics Technology Ltd raised thorny issues of separate legal entity doctrine, single economic unit theory, and reflective loss shared by common law legal systems. Despite finding that the defendant had breached his duties to the ultimate holding company, the Singapore Court of Appeal absolved the faithless director from most of his liabilities, relying on limited domestic precedent to the exclusion of a rich body of Commonwealth jurisprudence – including the House of Lords’ landmark Johnson v Gore Wood decision. This note explores the paths not taken by the court, and highlights the pitfalls of a narrow, autochthonous approach to problems of common law doctrine.     

论《合同法》的诚实信用原则

诚实信用原则是现代民法的最高指导原则,是适用整个民事合同的基本原则。尽管《合同法》的总则、分则的多处条文,对诚实信用原则均有明文规定,但对受主观因素影响较大的诚实信用原则来说,法律的规定显得十分单调、概括。正确理解《合同法》中诚实信用原则的精神,特别是正确掌握诚实信用原则在先合同义务、合同附随义务及后合同义务中的运用,无论对合同当事人还是对裁判人员都无疑具有相当的理论和实践意义。     

A Purposive Approach to Employment Protection or a Missed Opportunity?

This note discusses how far the Supreme Court judgment in Autoclenz Ltd v Belcher and others provides grounds for a purposive interpretation of the contract of employment for employment protection purposes, or whether its scope is limited to the specific issue of considering the validity of boilerplate contractual terms. The author reflects on the approach taken by the Supreme Court and how far issues of inequality and substantive fairness within employment relationships have been addressed. The note concludes that whilst the judgment has extended the context of facts to be considered to include a consideration of relative bargaining power, this in itself does not extend to a consideration of substantive fairness nor does it clarify the standards that should apply to a fair employment relationship.     

Los principios generales en la convención de naciones unidas sobre compraventa internacional de mercaderías

In this paper the author analyses Article 7o. (2) of the United Nations Convention on Contracts for the International Sale of Goods. This regulation cites the general principles on which it is founded as a law of integration and interpretation of the Convention. The paper investigates some of the principles established by the doctrine such as the following: acting in good faith; interpreting the real intention and logical nature of contracts; estoppel theory; the freedom to choose the content and form of the contract, and the mitigation of damages. It also demonstrates the scope of previous court rulings.     

最大诚信原则在海上保险合同履行过程中的适用

最大诚信原则是海上保险合同的一项基本原则。本文结合英国法中的相关观点和判例,对我国法律下海上保险合同履行过程中的最大诚信原则应包含的具体内容进行了探讨和研究。     

保险法最大诚信原则之审思

最大诚信原则为保险法基本原则之一,此观点几近为国内保险法学界通说,其存在理由包括保险合同的高度信息不对称性、射幸性、格式性等诸多理论,但相关理论均不足以作为解释其存在的依据。从最大诚信原则的核心规则来看,无论是告知义务、说明义务、还是弃权与禁止反言,亦不足以支撑其存在。最大诚信原则之称谓在理论与实践层面均具有巨大潜在危害性,应以诚信原则取代之。     

Rectifying the Course of Rectification

In Daventry District Council v Daventry & District Housing Ltd [2011] EWCA Civ 1153, the majority of the Court of Appeal held that a contract should be rectified because of a common mistake. This note discusses that decision and recent developments in the law of rectification. It is argued that the approach of the majority in Daventry is unsatisfactory, and that an emphasis upon ascertaining whether the parties have objectively made a common mistake may be inappropriate: rectification should only be granted in order to reflect the parties’ subjective intentions. Such an approach might help to distinguish common mistake rectification from unilateral mistake rectification.     

民法诚信原则与劳动法适用之博弈论纲——以“奋斗者协议”和“自愿弃保”为例

"奋斗者协议"与"自愿弃保"案件背后隐含的法理可简概为民法诚信原则与劳动法适用问题。实践中的误读和误判、《民法典》缺失劳动权(益)之基本民事权利设置、共享经济下新型劳动用工和疫情与后疫情时代之多重叠加效应,导致了劳动法之"衰"与"殇"。民法诚信原则同样适用劳动法含社会保障法,所谓劳动法不能适用该原则或者民法思维模式都是不严谨之"伪"命题。劳动法适用诚信原则应当考量其特殊性,惩戒权适用时,应当遵循比例原则和有利原则,并不得涉及劳动者非职业行为即私人行为和排除社会保障权。任何排除或剥夺劳动者社会保障权的约定或规章都是无效的。后劳动合同义务适用诚信原则不能"选择性""遗漏"抗辩权,如果当事人依法行使抗辩权,则不能裁定其违反了诚信原则,否则就是"伪"民法思维模式。实习关系属于特殊的劳动关系,在实习法律规范严重缺失下,用具有弥补法律不足之价值与功能的诚信原则治理"虚假实习"完全必要而且可行。     

合同视角下的专利默示许可研究?--以美中两国的司法实践为考察对象

从发生原因上讲，专利默示许可包括基于产品销售、合同关系和其他交往关系产生的默示许可三种基本形式。专利默示许可的理论基础，在英美法上主要基于其禁止反言理论，在大陆法上则是基于诚实信用原则。专利默示许可，究其本质是专利权人和专利技术使用人之间的一种合同关系，而非侵权关系。专利默示许可是合同法上事实合同的一种表现形式，其成就应当具备事实合同成立的一般条件。我国司法机关有关专利默示许可的实践探索，既有成功的一面，也有有待完善的不足之处。从制度构建上讲，专利默示许可应当建筑在专利法的诚实信用原则之上，同时在具体规则上保持其案例法的本色。     

The White & Carter Principle: A Restatement

This article reviews the English courts' approach to the controversial decision in White & Carter (Councils) Ltd v McGregor and suggests a systematic reformulation of the principle to be derived from that case. It argues that the notion of ‘legitimate interest’, at the core of that principle, suffers from severe obscurity as it stands. The critical issue in White & Carter is whether the wastefulness of a party's continuing performance outweighs its performance interest in earning the contract price. Three tests currently employed to determine the existence of a ‘legitimate interest’, namely, the adequacy of damages, the duty to mitigate and the concept of wholly unreasonable, are assessed and dismissed as either misdirecting or unsatisfactory in other ways. Finally, it articulates a new test based on a reappraisal of existing case law and summarises the key reasons for the courts to exercise their equitable jurisdiction against wasteful performance.     

The Heathrow Case in the Supreme Court: Climate Change Legislation and Administrative Adjudication

In R (on the application of Friends of the Earth Ltd and others) v Heathrow Airport Ltd the UK Supreme Court allowed an appeal against the Court of Appeal's decision that there had been a series of legal errors in the designation of the Airport National Policy Statement. This case note analyses the case from an ‘internal’ doctrinal perspective and argues that the Supreme Court could have engaged more explicitly with the legal issues that arise from climate change legislation for administrative law adjudication. For courts to adjudicate well in such circumstances they need to be prepared to develop administrative law doctrine, particularly in light of the issues of integrating climate change into public decision-making and of scientific/policy uncertainty which lie in the background of climate change legislation.     

Good Faith,Flawed Assets and the Emasculation of the UK Anti‐Deprivation Rule

The Supreme Court's unanimous decision in Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd and Lehman Brothers Special Financing Inc is of major significance to lenders, especially those in the global structured finance market. This case confirms the validity of commonly used insolvency‐triggered secured‐priority flip clauses, and, more generally, suggests a dramatically reduced role for the common law anti‐deprivation principle. The decision may not fully resolve market uncertainty, however, given the particular analysis adopted in the case itself (analysed here) and its divergence from the US statutory approach to the same principle.     

Section 994 of the Companies Act 2006 and the Primacy of Contract

The Court of Appeal's decision in Fulham Football Club (1987) Ltd v Richards & Anor is both of interest and significance. By embracing the idea of the parties’ ability to ‘contract out’ of their statutory right to petition the court for relief under section 994 of the Companies Act 2006 (the so‐called ‘unfair prejudice’ remedy), their Lordships have not only contrived to stunt the future development of unfair prejudice as a minority shareholder remedy but, and more importantly for the purposes of this case note, their decision has reasserted and extended the contractual analogy in modern UK company law.     

MWB Business Exchange Centres Ltd: The Practical Benefit Doctrine Marches On

In MWB Business Exchange Centres Ltd v Rock Advertising Ltd the Court of Appeal held that when an ongoing contract is varied so that one party's obligation to pay money is reduced, the variation is binding as long as the other party receives a practical benefit. In doing so, the Court of Appeal effectively confined the rule in Foakes v Beer to one‐off payments. This raises serious questions about the continued survival of Foakes v Beer. On the other hand, the Court of Appeal ensured that Foakes v Beer would not be killed off via equity by moving away from the suggestion in Collier v P & M J Wright (Holdings) Ltd that an agreed part‐payment of a debt by a debtor will always raise an estoppel preventing the creditor from demanding the remainder of the debt.     

Belize It or Not: Implied Contract Terms in Marks and Spencer v BNP Paribas

In Marks and Spencer v BNP Paribas, the Supreme Court restated the law on the implication of terms in fact, rejecting the previously authoritative approach taken by Lord Hoffmann in Attorney General of Belize v Belize Telecom Ltd. This article examines two major departures from Belize in Lord Neuberger's leading judgment: the treatment of implication as a process separate from interpretation, and a return to the ‘traditional tests’ for the implication of terms. It argues that these are retrogressive steps in our understanding of contract terms, which risk fostering an incoherent and unprincipled approach to the law.