Giving practical effect to good faith in the law of contract

Du Plessis, Jacques (2018)

CITATION: Du Plessis, J. 2018. Giving practical effect to good faith in the law of contract. Stellenbosch Law Review, 29(3):379-419.

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South African courts generally support the notion that good faith is an underlying value of the law of contract, as opposed to a rule or standard that could be relied on directly to promote fairness. However, some commentators have criticised this approach and pointed out that the private law codes of modern civil-law systems contain general clauses or rules to the effect that parties must act according to good faith. The contribution focuses on arguably the most prominent of these codified systems, namely German law, and seeks to determine whether its experiences with the practical application of a good faith clause do indeed suggest that South African law will benefit from according a more prominent status to good faith. After examining how German law narrowly defines good faith, and how the good faith clause fits in the broader context of the Constitution and the German Civil Code, it is shown how the clause fulfils three main functions. These are to “supplement” contractual duties, to “limit” parties in the way they exercise contractual rights, and to “correct” or modify contractual terms. This threefold division of basic functions is adopted as a structure within which a broad range of rules of South African law can be located. This comparative analysis enables a clearer understanding of how these rules of South African law currently give practical effect to good faith as value, or have the potential to do so in future. The conclusion is reached that it is not self-evident that our courts must elevate good faith to a general standard or rule in order to promote greater contractual fairness.

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