whether such a duty of good faith, assuming that it is prevalent in commercial
contracts, is to be expressly stated, or is it a duty implied in the contract. Simply,
looking at the wording of the typical lien clause as illustrated above in respect of the
NYPE standard form of charterparty and other similar standard forms, it is hardly
capable of accommodating an express requirement for the shipowner to act in good
faith while exercising his cargo lien, without a major distortion of the draft. As to
whether it can be contended that with or without an express term such a duty must be
implied, the legal meaning of the term must first be discerned and clearly understood.
In terms of English law, the decision in Yam Seng Pte Ltd v. International Trade
Corp Ltd.
29 triggered discussions on whether there should be a wider implication of
the duty of good faith on contracting parties.
4.2 Definitions of Good Faith
It is trite that the phenomenon of good faith extends far beyond being just a legal
precept; it is as much a moral standard for society as it is legal principle. As such, it is
a truism that evades precise definition whether legalistically or otherwise.
30 One
definition emphasizes the use of it by courts to constrain the contractual discretion
that the parties may have over a decision affecting the parties’ duties and rights.
31 It
is said that parties who exercise contractual discretion must act fairly, in order to “[P]
rotect justifiable expectations arising from their agreement.”
32 One commentator has
stated that good faith is a fundamental principle derived from the rule pacta sunt
servanda and other legal rules that are related to honesty, fairness and reasonableness.
33 It also features as an important tool in treaty interpretation.
34
The doctrine of good faith has permeated the English common law in the field of
commercial contracts but unlike the United States it has not been expressly provided
for in legislation. The U.S. Uniform Commercial Code gives a definition of “good
faith” as “honesty in fact and reasonable commercial standards of fair dealing”
35 and
the U.S. Restatement (Second) of Contracts, explains the meaning of good faith in
the following words:
29 [2013] EWHC 111 (QB); [2013] B.L.R. 147 per Sir George Leggatt.
30 For example, Juenger pointed out “the term. . . lacks a fixed meaning. . . because [it] is loose and
amorphous.” See Juenger (1995), p. 1254; Powers treats it as “an elusive term best left to lawyers
and judges to define over a period of time as circumstances requires.” See Powers (1999), p. 333.
31 Tetley (2004) para. IV 1).
32 Burton (2001), pp. 444–445.
33 O’Connor (1990), p. 102. It is to be noted that this is an established rule of international treaty law
expressly stated in Article 26 of the Vienna Convention on the Law of Treaties, 1969, 1155 UNTS
331.
34 Article 31(1) of Vienna Convention on the Law of Treaties, 1969 provides that “[A] treaty shall be
interpreted in good faith . . .”
35 See §1-201(20); §2-103(1)(b).
320
S. Jia and H. Yu
contracts, is to be expressly stated, or is it a duty implied in the contract. Simply,
looking at the wording of the typical lien clause as illustrated above in respect of the
NYPE standard form of charterparty and other similar standard forms, it is hardly
capable of accommodating an express requirement for the shipowner to act in good
faith while exercising his cargo lien, without a major distortion of the draft. As to
whether it can be contended that with or without an express term such a duty must be
implied, the legal meaning of the term must first be discerned and clearly understood.
In terms of English law, the decision in Yam Seng Pte Ltd v. International Trade
Corp Ltd.
29 triggered discussions on whether there should be a wider implication of
the duty of good faith on contracting parties.
4.2 Definitions of Good Faith
It is trite that the phenomenon of good faith extends far beyond being just a legal
precept; it is as much a moral standard for society as it is legal principle. As such, it is
a truism that evades precise definition whether legalistically or otherwise.
30 One
definition emphasizes the use of it by courts to constrain the contractual discretion
that the parties may have over a decision affecting the parties’ duties and rights.
31 It
is said that parties who exercise contractual discretion must act fairly, in order to “[P]
rotect justifiable expectations arising from their agreement.”
32 One commentator has
stated that good faith is a fundamental principle derived from the rule pacta sunt
servanda and other legal rules that are related to honesty, fairness and reasonableness.
33 It also features as an important tool in treaty interpretation.
34
The doctrine of good faith has permeated the English common law in the field of
commercial contracts but unlike the United States it has not been expressly provided
for in legislation. The U.S. Uniform Commercial Code gives a definition of “good
faith” as “honesty in fact and reasonable commercial standards of fair dealing”
35 and
the U.S. Restatement (Second) of Contracts, explains the meaning of good faith in
the following words:
29 [2013] EWHC 111 (QB); [2013] B.L.R. 147 per Sir George Leggatt.
30 For example, Juenger pointed out “the term. . . lacks a fixed meaning. . . because [it] is loose and
amorphous.” See Juenger (1995), p. 1254; Powers treats it as “an elusive term best left to lawyers
and judges to define over a period of time as circumstances requires.” See Powers (1999), p. 333.
31 Tetley (2004) para. IV 1).
32 Burton (2001), pp. 444–445.
33 O’Connor (1990), p. 102. It is to be noted that this is an established rule of international treaty law
expressly stated in Article 26 of the Vienna Convention on the Law of Treaties, 1969, 1155 UNTS
331.
34 Article 31(1) of Vienna Convention on the Law of Treaties, 1969 provides that “[A] treaty shall be
interpreted in good faith . . .”
35 See §1-201(20); §2-103(1)(b).
320
S. Jia and H. Yu