Finland

In Finland there is legislation relevant to the concepts of good faith (bona fide) and bad faith (mala fide). The main acts that regulate the question are Contracts Act (228/1929) and Sale of Goods Act (355/1987). These Acts set the limits, or so called ground rules, for parties’ behaviour. 

Finnish contract law is based on general clauses. When a contract does not include any express provision in answer to a particular question, resolution is sought from legislation and case law in Finland is a secondary source of law. 

The basic rule of good faith in Finnish law is provided for in Section 33 of Contracts Act: “A transaction that would otherwise be binding shall not be enforceable if it was entered into under circumstances that would make it incompatible with honor and good faith for anyone knowing of those circumstances to invoke the transaction and the person to whom the transaction was directed must be presumed to have known of the circumstances.”

On the other hand, the Sale of Goods Act regulates the duties of buyer and seller especially with regard to duties of giving information to the other party. Neglect or failure will lead to certain sanctions. It is noteworthy that the Act is only applicable to sale of goods and it is subject to the provisions of the Consumer Protection Act (38/1978).

England

It is well established that there is no general doctrine of good faith in English contract law. There are a number of reasons for this, including a concern that implying a duty of good faith would create too much uncertainty by implying obligations that are potentially vague and subjective. This could undermine the goal of contractual certainty, on which English law places great weight.

While the courts are unlikely to imply a duty of good faith in a commercial contract, parties may agree between themselves and include an express obligation to act in good faith.

One notable aspect of an expressly agreed duty of good faith is the obligation to disclose all material facts. This is a particular risk for many commercial lawyers who would not normally stop to consider whether appropriate disclosure had been made before entering into a contract.

A further, well-established aspect of good faith is the duty of rationality which is an implied obligation requiring parties not to exercise any contractual discretion 'arbitrarily' or 'capriciously'.

The wider application of good faith in English contract law was comprehensively reviewed in Yam Seng Pte Limited v International Trade Corporation Limited ([2013] EWHC 111), where the High Court combined the concept of good faith with the methodology for implied contractual terms to establish: a core duty of honesty; and a context-specific duty relating to the price of products. In the two years since it was handed down, the courts have given Yam Seng a mixed reception in practice.

France

There exists a principle of contractual good faith under French law.

Art.1134 of the French civil Code provides that "[Legally formed contracts] shall be performed in good faith".

Courts may apply that principle depending on the facts and circumstances of the case, having regard to e.g.:

the age, profession, knowledge or experience of the parties;

  • the subject-matter of the contract;
  • the preliminary negotiations between the parties;
  • whether contractual terms reduce or exclude the possibility to invoke good or bad faith.

Some other legal provisions, as well as some rules created by case-law, may be regarded as deriving from the good faith principle. For instance:

  • judges' right to mitigate or increase the amount of manifestly excessive or derisory contractual liquidated damages;
  • the 'duty of consistency' (one cannot change its behaviour arbitrarily, where the other party relied on the initial behaviour, and the change would be detrimental to him/her).

Some legal commentators have tried to militate in favour of general duties of contractual cooperation, mitigation of losses, correction of imbalances, etc.

However, the French Supreme Court ruled in 2007 that: "Contractual good faith may well allow judges to sanction the unfair exercise of a contractual right. However, it does not allow them to alter the very substance of contracts".

Current French legislation in preparation (reform of contract law) will probably uphold the rules created by case-law on the basis of the good faith principle (such as, for instance, the duty to disclose essential information that is legitimately unknown to the other party, prior to entering into a contract).