The concept of “good faith and fair dealing” in the performance of contracts is a mandatory aspect of all contract law: “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”[1] Good faith is generally viewed as the absence of bad faith:
[W]hat meaning have the courts and the Code draftsman given to the phrase “good faith”? It will be argued that good faith, as used in the case law, is best understood as an “excluder” – it is a phrase which has no general meaning or meanings of its own, but which serves to exclude many heterogeneous forms of bad faith.[2]
This negative definition of good faith (the absence of bad faith) arose from Professor Robert S. Summers’ examination of case law, an examination that informed the treatment of good faith in contract in the Restatement (Second) of Contracts. Judges, he found, used the good faith requirement to perform a safety valve function to regulate behavior, if not directly violating the explicit terms of a contract then violating the spirit of the contract, often frustrating the justified expectations of the parties to the deal.[3] Yet, the good faith standard in contract “is no more than a minimal requirement (rather than a high ideal).”[4]
