Introduction
The role of good faith and fair dealing in international contracts has become one of the most debated yet essential concepts in global commerce. Good faith, which requires honesty, transparency, and cooperation, and fair dealing, which demands equitable conduct between contracting parties, are principles that cut across legal traditions. In international transactions, where cultural, linguistic, and legal differences converge, good faith and fair dealing serve as vital safeguards that ensure fairness, build trust, and promote long-term commercial stability.
This article examines the comparative approaches of civil law systems, common law jurisdictions, and the transnational frameworks such as the CISG and UNIDROIT Principles, demonstrating how these principles function as cornerstones of international contract law.
1. Good Faith and Fair Dealing in Civil Law Systems
Civil law jurisdictions, including Germany, France, Switzerland, and Turkey, have long recognized good faith (bona fides) as a central principle.
- German Civil Code (BGB § 242): Requires contracts to be performed in accordance with good faith, taking into account customary practices. This provision empowers courts to prevent abuse of contractual rights.
- French Civil Code (Article 1104): Mandates that contracts must be negotiated, formed, and performed in good faith.
- Turkish Code of Obligations: Similarly incorporates good faith as a general principle, ensuring that both pre-contractual negotiations and contract performance are conducted fairly.
In these systems, good faith is not merely an interpretive tool—it is a binding legal obligation. Courts actively enforce it, sometimes even modifying contractual outcomes to prevent injustice.
2. Good Faith and Fair Dealing in Common Law Systems
In contrast, common law jurisdictions (such as England and the United States) traditionally approach good faith with caution.
- English Law: Generally rejects a broad, overarching duty of good faith. Courts prefer certainty and freedom of contract, though recent developments show a growing recognition of good faith in “relational contracts” (e.g., long-term partnerships).
- U.S. Uniform Commercial Code (UCC § 1-304): Imposes an obligation of good faith in the performance and enforcement of contracts. Unlike English law, American law accepts good faith as a binding duty, particularly in commercial transactions.
Thus, while common law favors autonomy and predictability, it increasingly acknowledges that without fair dealing, cross-border agreements may collapse under opportunistic behavior.
3. Good Faith in International Instruments
a) CISG (United Nations Convention on Contracts for the International Sale of Goods)
- Article 7(1): Requires interpretation of the Convention to promote good faith in international trade.
- While the CISG does not explicitly impose a direct duty of good faith in contract performance, tribunals often use this principle to interpret parties’ obligations and prevent abusive practices.
b) UNIDROIT Principles of International Commercial Contracts
- Explicitly recognize good faith and fair dealing as mandatory rules (Article 1.7).
- Parties cannot exclude the obligation of good faith, making it one of the strongest endorsements of this principle in international law.
- Frequently applied by arbitral tribunals to fill gaps or harmonize conflicting domestic laws.
4. Comparative Challenges and Benefits
Challenges:
- Different interpretations: Civil law sees good faith as binding, while common law often limits it.
- Risk of uncertainty: Over-broad interpretations may undermine predictability, which businesses value.
Benefits:
- Promotes trust: Parties are more willing to engage in long-term international ventures.
- Prevents opportunism: Stops stronger parties from exploiting weaker ones.
- Harmonization: Soft law instruments like UNIDROIT reduce divergences between legal systems.
Conclusion
The role of good faith and fair dealing in international contracts is indispensable to ensuring fairness and stability in cross-border transactions. While civil law systems impose good faith as a binding rule and common law systems approach it more cautiously, international frameworks such as the CISG and UNIDROIT Principles bridge these traditions by affirming its universal importance. In today’s global economy, where international contracts govern everything from energy projects to digital commerce, good faith and fair dealing are not optional virtues—they are strategic necessities.
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