[G]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed
common purpose and consistency with the justified expectations of the other party; it
excludes a variety of types of conduct characterized as involving ‘bad faith’ because they
violate community standards of decency, fairness or reasonableness.
36
The English jurist Sir George Leggatt has summarized two aspects of good faith
drawing them from the US legislation; namely, “(1) adherence to reasonable commercial standards of fair dealing; and (2) faithfulness to the agreed common purpose
of the contract and to the reasonable expectations of the parties arising from it.”
37 He
states, however, that this explanation is quite abstract, and it acquires more concrete
meaning only from particular cases. It is noteworthy that in the United States law, it
is the contract that imposes the duty of good faith, which means that the duty only
exists during the performance of the contract. This is consistent with the underlying
aim of not restricting the parties’ freedom of contract.
38
It can be gleaned from the definitions of good faith mentioned above, that a duty
to act in good faith, whether it is express or implied, is a sound basis for the
contention that there was compliance with the requirement of reasonableness by
the shipowner in invoking and exercising his rights under a lien clause in a
charterparty. However, it is notable that in contradistinction to the above propositions, Lord Reid held in White and Carter (Councils) Ltd v. McGregor, that “it has
never been the law that a person is only entitled to enforce his contractual rights in a
reasonable way.”
39 If this statement is perceived as a presupposition that good faith
is a necessary ingredient of reasonableness with respect to a party’s entitlement to
enforce his contractual rights, then it must follow that there is no duty to act in good
faith unless such duty is expressly stated in the contract. In this context, it must be
noted that enforcement of a right under the contract as mentioned by Lord Reid, is
not synonymous with performance which connotes fulfilment of obligations of both
parties to a contract and is a notion wider than invoking and exercising a right under
a contract such as in the case of a shipowner’s cargo lien in a charterparty. The verity
of the above contentions in terms of how English law continues to evolve in this field
is explored in the discussion below.
4.3 Current Position of Good Faith in Common Law
The position of the doctrine of good faith in English law is reflected in the decision of
Bingham L.J. in Picture Library Ltd v. Stiletto Visual Programmes Ltd.,
40 Bingham
L.J. where he held as follows:
36 §205; See also, Leggatt (2016) para. 11.
37 Leggatt (2016) para. 12.
38 Leggatt (2016) para. 9.
39 [1962] AC 413, 431; Foxton (2017), p. 362.
40 [1989] Q.B. 433.
Shipowner’s Implied Obligations in a Charterparty Relating to. . .
321
common purpose and consistency with the justified expectations of the other party; it
excludes a variety of types of conduct characterized as involving ‘bad faith’ because they
violate community standards of decency, fairness or reasonableness.
36
The English jurist Sir George Leggatt has summarized two aspects of good faith
drawing them from the US legislation; namely, “(1) adherence to reasonable commercial standards of fair dealing; and (2) faithfulness to the agreed common purpose
of the contract and to the reasonable expectations of the parties arising from it.”
37 He
states, however, that this explanation is quite abstract, and it acquires more concrete
meaning only from particular cases. It is noteworthy that in the United States law, it
is the contract that imposes the duty of good faith, which means that the duty only
exists during the performance of the contract. This is consistent with the underlying
aim of not restricting the parties’ freedom of contract.
38
It can be gleaned from the definitions of good faith mentioned above, that a duty
to act in good faith, whether it is express or implied, is a sound basis for the
contention that there was compliance with the requirement of reasonableness by
the shipowner in invoking and exercising his rights under a lien clause in a
charterparty. However, it is notable that in contradistinction to the above propositions, Lord Reid held in White and Carter (Councils) Ltd v. McGregor, that “it has
never been the law that a person is only entitled to enforce his contractual rights in a
reasonable way.”
39 If this statement is perceived as a presupposition that good faith
is a necessary ingredient of reasonableness with respect to a party’s entitlement to
enforce his contractual rights, then it must follow that there is no duty to act in good
faith unless such duty is expressly stated in the contract. In this context, it must be
noted that enforcement of a right under the contract as mentioned by Lord Reid, is
not synonymous with performance which connotes fulfilment of obligations of both
parties to a contract and is a notion wider than invoking and exercising a right under
a contract such as in the case of a shipowner’s cargo lien in a charterparty. The verity
of the above contentions in terms of how English law continues to evolve in this field
is explored in the discussion below.
4.3 Current Position of Good Faith in Common Law
The position of the doctrine of good faith in English law is reflected in the decision of
Bingham L.J. in Picture Library Ltd v. Stiletto Visual Programmes Ltd.,
40 Bingham
L.J. where he held as follows:
36 §205; See also, Leggatt (2016) para. 11.
37 Leggatt (2016) para. 12.
38 Leggatt (2016) para. 9.
39 [1962] AC 413, 431; Foxton (2017), p. 362.
40 [1989] Q.B. 433.
Shipowner’s Implied Obligations in a Charterparty Relating to. . .
321