contract and legal certainty. a wider implication for good faith in all commercial
contracts would not be acceptable in English Law; only in certain specific kinds such
as relational contracts and employment contracts. An objective standard for the
scope of such an implied duty of good faith cannot be introduced simply because
it would create legal uncertainty. Arguably, therefore, the obligation to act in a
reasonable manner cannot be based on an implied duty of good faith; and so, it is,
with respect to a shipowner’s right to exercise a cargo lien provided for in a
charterparty.
5 Contractual Discretion
5.1 Preliminary Thoughts
Discretion in reference to contracts has been described as “the hole in a doughnut - it
does not exist except as an area left open by a surrounding belt of restriction”.
63 As
metaphoric as it may sound, the phenomenon of discretion appears frequently in the
domain of contracts. At the outset, it may be stated that the development of the
so-called contractual discretion in English law, may reverse the legal position on the
implied duty of good faith. The following discussion delves into what potential
changes may ensue from this possible eventuality. It is expedient to inquire into what
exactly this phenomenon means and what are its implications in relation to the
doctrine of good faith. It has been mentioned earlier that one definition of good faith
emphasizes its application by courts to constrain contractual discretion that the
parties may have over a decision affecting their duties and rights.
64 Needless to
say, the discussion is not intended to meander away from the central theme of this
discourse which is the shipowner’s right to exercise a cargo lien in relation to a
charterparty.
5.2 The Notion of Contractual Discretion
In English law, there is a growing body of case law on the exercise of contractual
discretions, which could evolve into a doctrine that treats performance in good faith
as an obligation that applies to every contract, except to the extent that it is excluded
expressly or impliedly.
65 Where there is a discretion, there is an obligation to
63 Dworkin (1977), p. 31.
64 Tetley (2004), p. 561, para. IV 1).
65 Leggatt (2016) para. 44.
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contracts would not be acceptable in English Law; only in certain specific kinds such
as relational contracts and employment contracts. An objective standard for the
scope of such an implied duty of good faith cannot be introduced simply because
it would create legal uncertainty. Arguably, therefore, the obligation to act in a
reasonable manner cannot be based on an implied duty of good faith; and so, it is,
with respect to a shipowner’s right to exercise a cargo lien provided for in a
charterparty.
5 Contractual Discretion
5.1 Preliminary Thoughts
Discretion in reference to contracts has been described as “the hole in a doughnut - it
does not exist except as an area left open by a surrounding belt of restriction”.
63 As
metaphoric as it may sound, the phenomenon of discretion appears frequently in the
domain of contracts. At the outset, it may be stated that the development of the
so-called contractual discretion in English law, may reverse the legal position on the
implied duty of good faith. The following discussion delves into what potential
changes may ensue from this possible eventuality. It is expedient to inquire into what
exactly this phenomenon means and what are its implications in relation to the
doctrine of good faith. It has been mentioned earlier that one definition of good faith
emphasizes its application by courts to constrain contractual discretion that the
parties may have over a decision affecting their duties and rights.
64 Needless to
say, the discussion is not intended to meander away from the central theme of this
discourse which is the shipowner’s right to exercise a cargo lien in relation to a
charterparty.
5.2 The Notion of Contractual Discretion
In English law, there is a growing body of case law on the exercise of contractual
discretions, which could evolve into a doctrine that treats performance in good faith
as an obligation that applies to every contract, except to the extent that it is excluded
expressly or impliedly.
65 Where there is a discretion, there is an obligation to
63 Dworkin (1977), p. 31.
64 Tetley (2004), p. 561, para. IV 1).
65 Leggatt (2016) para. 44.
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