Content of the duty to act in good faith

The usual content of the obligation to act in good faith is considered to be:

  • an obligation to act honestly and with a fidelity to the bargain;
  • an obligation not to act dishonestly and not to act to undermine the bargain entered or the substance of the contractual benefit bargained for; and
  • an obligation to act reasonably and with fair dealing having regard to the interests of the parties and to the provisions, aims and purposes of the contract, objectively ascertained.

What is necessary to satisfy the duty will depend on the contractual and factual context (including the nature of the contract or contextual relationship). It does not require a contracting party to prefer the interests of the other contracting party, or to subordinate its self-interest to the other party.

An implied obligation may be excluded either by express contractual provision or because it is inconsistent with the terms of the contract. However, to the extent that good faith is inherent in contract law, for example, because it requires honesty, it cannot be excluded.