The Function and Role of Good Faith under the Contract for the International Sale of Goods

The Function and Role of Good Faith under the Contract for the International Sale of Goods

The doctrine of good faith in civil law was a broad and comprehensive principle, which governed the relationship of the parties including in the pre-contractual phase. However, the common law, except in insurance contracts, had traditionally rejected the doctrine of good faith in civil law. The concept of good faith had been considered as an ethical norm relating to honesty, genuineness, fair dealing and reasonableness. However it may be more ambiguous in relation to a legal notion. Good faith could not be simply defined since it has different meanings according to circumstances concerned. Good faith in commercial transactions exists in most countries, but the usefulness of its treatment and the scope of its application differ. In contract law, good faith has both a subjective sense, which requires honesty, and an objective sense, which requires compliance with standards of fair dealing. The observance of good faith under Article 7(1) can be applied to the statement and conduct by the contracting parties through the interpretation of Article 8 and usage agreed upon between the parties under Article 9. Moreover, by the application of Article 7(2) in the CISG, good faith can be properly applied in the pre-contractual stage. Article 7(2) offered the interpretative principle as guidance to solve the concerning questions not expressly settled in the CISG. If this provision is applied, the questions relating to the formation of the contract for which the CISG does not contain any specific provision would be settled by the principle of good faith. The good faith to be observed under Article 7(1) is the good faith standard in international trade. The standard to measure good faith in international transactions would be sought in reasonableness itself that has been reasonably formed to cause the fair dealing. Though good faith and reasonableness are separate norms, they also have a close interrelationship. There are a number of provisions where good faith, within the meaning of the CISG, may be implied as a standard of reasonableness, which is a test to estimate the important provisions in the Convention.