Common law obligations of good faith in Australian commercial contracts – a relational recipe

Abstract

A common law obligation of good faith in contractual performance and enforcement is arising in the form of an implied contractual term, with judicial suggestion (both at Supreme Court and Federal Court level) that the implication should be an incident of all commercial contracts. This article examines the potential implications of this broad approach to good faith by the use of two case studies involving contractual opportunism (and a consequent consideration of motive). The case studies raise a number of questions. Assuming good faith is an implied incident of a certain class of contract, is the class of ‘commercial contracts’ an appropriate good faith filter or does the filter need refinement? Are commercial contracts sufficiently homogenous that a good faith obligation should be implied, as a matter of law, in all contracts falling within this class? Is a cooperative contractual model (such as good faith) appropriate in all commercial contract transactions or is there still scope for the operation of the traditional adversarial contractual model? The article proffers a solution whereby the commercial contractual context may be relevant, rather than according all commercial contracts the same contractual treatment regardless of context.