The notion of good faith in contract negotiations: a reliance-based comparative approach

Abstract

Abstract For civil-law lawyers, it seems quite obvious that negotiations should be conducted in good faith because it is usually considered a general principle of contract law that governs all stages of the “life” of a contract, including its formation phase. In contrast, for common-law lawyers the role of good faith in the negotiation of a contract raises difficulties. There are varying views between common-law jurisdictions, but the primary issue seems to be the uncertain content of the notion of good faith. This analysis is based on a comparative study between leading civil-law (France and Germany) and common-law (England and U.S.) jurisdictions. This Article explores the meaning of good faith, in its subjective and objective dimensions, focusing on the content of good faith in contract negotiations in civil-law and common-law jurisdictions, and in instruments of harmonization. It then explores the link between good faith and the duty of loyalty in contractual negotiations, explaining that in the civil law it is generally thought that a duty of loyalty emanates from the general duty of good faith. Finally, the Article offers an alternative view as to the theoretical basis of precontractual liability: shifting the view from good faith to the notion of reliance. It argues that this reliance-based approach could have an impact in bridging the civil law – common law divide in their view of precontractual good faith.