arbitrators were not authorized to act independently of the licensing agreement itself.
The majority also found a breach of an Illinois state duty of good faith, which the
dissenting arbitrator thought specious.
58 The dissenting opinion emerged from an
American arbitrator who opined that good faith is not a part of English law and hence
cannot be applied in reading the licensing Agreement. However, the Tribunal held
that the international efficiency of the contract in question required the direct
application of the general principle of good faith.
59 It held that the obligation of
good faith under Illinois Law establishes an independent cause of action under the
Agreement; and that “good faith is not only an aid in the interpretation of the
Agreements, but is a distinct legal basis for contractual commitments.”
In light of differences in the case law, although in the absence of an express
clause, it is now more likely that the courts will imply a duty to act in good faith, it
would be prudent for parties to introduce a good faith clause to the contract to avoid
the uncertainties as “in all matters [relating to this Agreement] the parties will act
with utmost good faith towards one another and will act reasonably and prudently at
all times”.
60 As contracting parties to be expressly bound by good faith, the clause
must specify what good faith in the context of the contract means. It could be
specifying actions clearly required for the substantial satisfaction of the contract or
clarity of deadlines if the nature of the contract so demands. Maritime matters
demand immediate attention, care and caution such as when a ship gives notice of
readiness an hour and a half after the cancellation time, and the cancellation clause is
invoked. This clearly means cancellation as valid under the contract. But in the light
of good faith, such cancellation may sometimes be held contrary to good faith.
61 The
civil law jurisdictions have good faith clearly embodied in the statues. Regardless of
jurisdiction, as a matter of caution the parties may clearly mention what could be
breach of the contract and under what conditions the contract could be cancelled or
conditions under which a breach could be atoned between the parties. Judicial
decisions may waver in determining slight and substantial breach, hence, parties
could define “substantial” and “light” breaches in their contracts as well.
The Achilleas,
62 dealt with the extent to which knowledge of the likelihood of
loss in the event of breach of contract was sufficient to claim compensation from the
party in breach for any unusual loss. The charterer gave notice to terminate the hire,
and the owner found a new charterer. Until the termination, the charterers
58 https://caselaw.findlaw.com/us-7th-circuit/1361842.html.
59 Cremades (2012), pp. 761–789.
60 Berkeley Community Villages Ltd v. Pullen [2007] EWHC 1330 (Ch).
61 “German law rarely seeks to find a gap in the contract to be settled by means of constructive
interpretation. Since judges in Germany feel obliged to refer to a statutory text, they often invoke §
242 BGB, which requires them—when deciding what is due from the party rendering performance—to apply the same standard as they apply under § 157 BGB when interpreting a contract,
namely the standard of good faith and proper commercial practice”, See, Kotz Hein, ‘European
Contract Law’, p. 236. Also see Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. (The Hansa
Nord).
62 [2009] 1 AC 61 (HL).
Good Faith in Maritime Law Contracts
127
The majority also found a breach of an Illinois state duty of good faith, which the
dissenting arbitrator thought specious.
58 The dissenting opinion emerged from an
American arbitrator who opined that good faith is not a part of English law and hence
cannot be applied in reading the licensing Agreement. However, the Tribunal held
that the international efficiency of the contract in question required the direct
application of the general principle of good faith.
59 It held that the obligation of
good faith under Illinois Law establishes an independent cause of action under the
Agreement; and that “good faith is not only an aid in the interpretation of the
Agreements, but is a distinct legal basis for contractual commitments.”
In light of differences in the case law, although in the absence of an express
clause, it is now more likely that the courts will imply a duty to act in good faith, it
would be prudent for parties to introduce a good faith clause to the contract to avoid
the uncertainties as “in all matters [relating to this Agreement] the parties will act
with utmost good faith towards one another and will act reasonably and prudently at
all times”.
60 As contracting parties to be expressly bound by good faith, the clause
must specify what good faith in the context of the contract means. It could be
specifying actions clearly required for the substantial satisfaction of the contract or
clarity of deadlines if the nature of the contract so demands. Maritime matters
demand immediate attention, care and caution such as when a ship gives notice of
readiness an hour and a half after the cancellation time, and the cancellation clause is
invoked. This clearly means cancellation as valid under the contract. But in the light
of good faith, such cancellation may sometimes be held contrary to good faith.
61 The
civil law jurisdictions have good faith clearly embodied in the statues. Regardless of
jurisdiction, as a matter of caution the parties may clearly mention what could be
breach of the contract and under what conditions the contract could be cancelled or
conditions under which a breach could be atoned between the parties. Judicial
decisions may waver in determining slight and substantial breach, hence, parties
could define “substantial” and “light” breaches in their contracts as well.
The Achilleas,
62 dealt with the extent to which knowledge of the likelihood of
loss in the event of breach of contract was sufficient to claim compensation from the
party in breach for any unusual loss. The charterer gave notice to terminate the hire,
and the owner found a new charterer. Until the termination, the charterers
58 https://caselaw.findlaw.com/us-7th-circuit/1361842.html.
59 Cremades (2012), pp. 761–789.
60 Berkeley Community Villages Ltd v. Pullen [2007] EWHC 1330 (Ch).
61 “German law rarely seeks to find a gap in the contract to be settled by means of constructive
interpretation. Since judges in Germany feel obliged to refer to a statutory text, they often invoke §
242 BGB, which requires them—when deciding what is due from the party rendering performance—to apply the same standard as they apply under § 157 BGB when interpreting a contract,
namely the standard of good faith and proper commercial practice”, See, Kotz Hein, ‘European
Contract Law’, p. 236. Also see Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. (The Hansa
Nord).
62 [2009] 1 AC 61 (HL).
Good Faith in Maritime Law Contracts
127