Abstract
Good faith is a blanket clause under which courts develop standards of fair and honest behavior. It gives ample discretion to the judiciary and entitles a court to narrow down the interpretation of statutes or contracts and even to deviate from codified rules, from the wording in the law or the contract or to fill gaps. The law and economics literature relates bad faith to opportunistic behavior and it is accepted that in specific cases where the application of default or mandatory rules leads to opportunism or where both the law and the contract are silent on risk, the judge can resort to the good faith principle. As a result the parties may delegate part of the contractual drafting to the legal system in addition to having reduced apprehension regarding the possibility of opportunistic behavior from the other side. This allows them to keep contracts relatively short and reduces the costs of defensive strategies.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsReferences
Association Henri Capitant and Société de législation comparée (2008) European contract law – materials for a common frame of reference: terminology, guiding principles, model rules. Sellier European Law Publishers, Munich
Burton SJ (1980) Breach of contract and the common law duty to perform in good faith. Harv Law Rev 94(2):369–404
Cohen GM (1992) The negligence-opportunism tradeoff in contract law. Hofstra Law Rev 20(4):941–1016
Diniz MH (2007) Curso de direito civil brasileiro, vol 3. Teoria das obrigações contratuais e extracontratuais, 23 edn. Revista e atualizada de acordo com a Reforma do CPC. Saraiva, São Paulo
Dixit AK (2004) Lawlessness and economics – alternative modes of governance. Princeton University Press, Princeton
Goode R (1992) The concept of “good faith” in English law. http://www.cisg.law.pace.edu/cisg/biblio/goode1.html. Accessed 18 Feb 2014
Grüneberg C (2010) § 241. In: Palandt O (ed) Bürgerliches Gesetzbuch. Verlag C.H. Beck, München
Harrison JL (1995) Law and economics. West Publishing, St. Paul
Hausheer H, Jaun M (2003) Die Einleitungsartikel des ZGB – Art. 1-10 ZGB. Stämfli, Bern
Kaplow L, Shavell S (2002) Economic analysis of law. In: Auerbach AJ, Feldstein M (eds) Handbook of public economics, 1661–1784. Elsevier, Amsterdam
Mackaay E (2009) The economics of civil law contract and of good faith. https://papyrus.bib.umontreal.ca/xmlui/bitstream/handle/1866/3016/Mackaay_Trebilcock-Symposium%20_3_.pdf?sequence=1. Accessed 18 Feb 2014
Mackaay E (2011) Good faith in civil law systems – a legal-economic analysis. CIRANO – Scientific Publications 2011s-74. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1998924. Accessed 18 Feb 2014
Mackaay E, Leblanc V (2003) The law and economics of good faith in the civil law of contract. https://papyrus.bib.umontreal.ca/xmlui/bitstream/handle/1866/125/Article%20papyrus.pdf?sequence=1. Accessed 18 Feb 2014
Miller AD, Perry R (2013) Good faith performance. Iowa Law Rev 98(2):689–745
Muris TJ (1981) Opportunistic behavior and the law of contracts. Minn Law Rev 65(4):521–590
Musy AM (2000) The good faith principle in contract law and the precontractual duty to disclose: comparative analysis of new differences in legal cultures. http://www.icer.it/docs/wp2000/Musy192000.pdf. Accessed 18 Feb 2014
Nóbrega FFB (2012) Custos e Benefícios de um Sistema Jurídico baseado em Standards: uma análise econômica da boa-fé objetiva. Econ Anal Law Rev 3(2):170–188
Posner RA (2007) Economic analysis of law. Wolters Kluwer, Austin
Schäfer HB, Aksoy HC (2015) Alive and well, the good faith principle in Turkish contract law. Eur J Law Econ (in print), https://doi.org/10.1007/s10657-015-9492-1
Schäfer HB, Ott C (2004) The economic analysis of civil law. Edward Elgar, Cheltenham
Schwartz A (2003) The law and economics approach to contract theory. In: Wittman DE (ed) Economic analysis of the law. Blackwell, Maiden
Sepe SM (2010) Good faith and contract interpretation: a law and economics perspective. Arizona Legal Studies, discussion paper no. 10-28. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1086323. Accessed 18 Feb 2014
Summers RS (1968) “Good faith” in general contract law and the sales provisions of the uniform commercial code. Virginia Law Rev 54(2):195–267
Timm LB (2008) Funcao Social Do Direito Contractual No Código Civil Brasileiro Justica Distributiva vs. Eficiéncia Economia. Rev Tribunais, 97, 876:11–43
Williamson OE (1975) Markets and hierarchies: analysis and antitrust implications. Free Press, New York
Zimmermann R, Whittaker S (2000) Good faith in European contract law. Cambridge University Press, Cambridge
Further Reading
Bridge MG (1984) Does Anglo-Canadian contract law need a doctrine of good faith? Can Bus Law J 9(4):385–426
O’Connor JF (1990) Good faith in English law. Darmouth, Aldershot
Piers M (2011) Good faith in English law – could a rule become a principle? Tulane Eur Civ Law Forum 26(1):123–169
Teubner G (1998) Legal irritants: good faith in British law or how unifying law ends up in new divergences. Modern Law Rev 61(1):11–32
Whittaker S (2013) Good faith, implied terms and commercial contracts. Law Q Rev 129(3):451–469
Author information
Authors and Affiliations
Corresponding authors
Editor information
Editors and Affiliations
Additional information
We thank Anne van Aaken, Hein Kötz, Alan Miller, Luciano Benedetti Timm, and Reinhard Zimmermann for valuable comments on an earlier draft. All errors are ours.
Rights and permissions
Copyright information
© 2019 Springer Science+Business Media, LLC, part of Springer Nature
About this entry
Cite this entry
Schäfer, HB., Aksoy, H.C. (2019). Good Faith. In: Marciano, A., Ramello, G.B. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7753-2_565
Download citation
DOI: https://doi.org/10.1007/978-1-4614-7753-2_565
Published:
Publisher Name: Springer, New York, NY
Print ISBN: 978-1-4614-7752-5
Online ISBN: 978-1-4614-7753-2
eBook Packages: Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences