port for three and a half years and the shipowner claimed demurrage of over USD
1 million, which was 10 times more than the cost of buying replacement containers.
The High Court ruled against the shipowner and held that “the innocent party cannot
exercise its power to keep the contract alive if to do so would be wholly unreasonable”.
57 The case was then brought to the Court of Appeal, Lord Justice Moore-Bick
advocated a return to the orthodox view that English law does not recognise any
general duty of good faith.
58 He held that if it were so, it would be invoked so often
and it would bring uncertainty to the terms to which the parties had agreed.
In Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Ioannis Kent (AKA
John Kent),
59 the court held that it was unnecessary and perhaps impossible to spell
out an exhaustive description of what the obligation of good faith involved. It held
that a summary description of it given by Allsop CJ of the Federal Court of Australia
in the Paciocco case
60 was consistent with the English case law, which expounds an
obligation to act honestly and with fidelity to the bargain; an obligation not to act to
undermine the substance of the contractual benefit bargained for; and an obligation
to act reasonably and with fair dealing having regard to the interests of parties and to
the provisions, aims and purposes of the contract, objectively ascertained.
The learned judge further stated that, “[T]he obligation of fair dealing is not a
demanding one and does no more than require a party to refrain from conduct which
in the relevant context would be regarded as commercially unacceptable by reasonable and honest people.”
61 As far as the standard of fair dealing or reasonableness is
concerned, the learned judge cited Allsop CJ who opined in Paciocco v. Australia
and New Zealand Banking Group Limited (The Paciocco) that
. . . any given case must recognize the nature of the contract or relationship, the different
interests of the parties and the lack of necessity for parties to subordinate their own interests
to those of the counterparty. That a normative standard is introduced by good faith is clear. It
will, however, not call for the same acts from all contracting parties in all cases. The legal
norm should not be confused with the factual question of its satisfaction. The contractual and
factual context (including the nature of the contract or contextual relationship) is vital to
understand what, in any case, is required to be done or not done to satisfy the normative
standard.
62
It can be concluded from a perusal of the above cases that in terms of the law as it
obtains, good faith introduces a normative standard for what counts as “reasonable
manner” regarding the performance of a contract provided it is ascertained objectively and in the contractual and factual context of the contract in question. A
far-reaching standard is not acceptable in English law for the sake of freedom of
57 MSC Mediterranean Shipping Co v. Cottonex [2015] EWHC 283 (Comm).
58 MSC Mediterranean Shipping Co v. Cottonex [2016] EWCA Civ 789.
59 [2018] EWHC 333 (Comm).
60 [2015] FCAFC 50; See also, Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v. Ioannis
Kent (AKA John Kent) [2018] EWHC 333 (Comm) para. 175.
61 Ibid. para. 175.
62 The Paciocco para. 290; see also ibid. para 175.
Shipowner’s Implied Obligations in a Charterparty Relating to. . .
325
1 million, which was 10 times more than the cost of buying replacement containers.
The High Court ruled against the shipowner and held that “the innocent party cannot
exercise its power to keep the contract alive if to do so would be wholly unreasonable”.
57 The case was then brought to the Court of Appeal, Lord Justice Moore-Bick
advocated a return to the orthodox view that English law does not recognise any
general duty of good faith.
58 He held that if it were so, it would be invoked so often
and it would bring uncertainty to the terms to which the parties had agreed.
In Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Ioannis Kent (AKA
John Kent),
59 the court held that it was unnecessary and perhaps impossible to spell
out an exhaustive description of what the obligation of good faith involved. It held
that a summary description of it given by Allsop CJ of the Federal Court of Australia
in the Paciocco case
60 was consistent with the English case law, which expounds an
obligation to act honestly and with fidelity to the bargain; an obligation not to act to
undermine the substance of the contractual benefit bargained for; and an obligation
to act reasonably and with fair dealing having regard to the interests of parties and to
the provisions, aims and purposes of the contract, objectively ascertained.
The learned judge further stated that, “[T]he obligation of fair dealing is not a
demanding one and does no more than require a party to refrain from conduct which
in the relevant context would be regarded as commercially unacceptable by reasonable and honest people.”
61 As far as the standard of fair dealing or reasonableness is
concerned, the learned judge cited Allsop CJ who opined in Paciocco v. Australia
and New Zealand Banking Group Limited (The Paciocco) that
. . . any given case must recognize the nature of the contract or relationship, the different
interests of the parties and the lack of necessity for parties to subordinate their own interests
to those of the counterparty. That a normative standard is introduced by good faith is clear. It
will, however, not call for the same acts from all contracting parties in all cases. The legal
norm should not be confused with the factual question of its satisfaction. The contractual and
factual context (including the nature of the contract or contextual relationship) is vital to
understand what, in any case, is required to be done or not done to satisfy the normative
standard.
62
It can be concluded from a perusal of the above cases that in terms of the law as it
obtains, good faith introduces a normative standard for what counts as “reasonable
manner” regarding the performance of a contract provided it is ascertained objectively and in the contractual and factual context of the contract in question. A
far-reaching standard is not acceptable in English law for the sake of freedom of
57 MSC Mediterranean Shipping Co v. Cottonex [2015] EWHC 283 (Comm).
58 MSC Mediterranean Shipping Co v. Cottonex [2016] EWCA Civ 789.
59 [2018] EWHC 333 (Comm).
60 [2015] FCAFC 50; See also, Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v. Ioannis
Kent (AKA John Kent) [2018] EWHC 333 (Comm) para. 175.
61 Ibid. para. 175.
62 The Paciocco para. 290; see also ibid. para 175.
Shipowner’s Implied Obligations in a Charterparty Relating to. . .
325