Managers, contracts and good faith - challenging the community expectations myth

Tyrone M. Carlin

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Abstract

Contracts represent a key device for governing and intermediating commerce. As such, a body of contract law which produces outcomes in accordance with the expectations of commercial actors is a key factor in determining the risk and thus costliness of conducting business within a particular jurisdiction. Both commercial practice and the law of contract change over time. Examples of the former include the increasing recourse to outsourcing, alliances and partnering arrangements while a topical example of the latter represents the growing debate (in Australia) about the existence and role of good faith performance obligations in contract. Proponents of the latter doctrine have asserted that the growing reliance on relational commercial forms evident in business operations means a need for good faith norms within contract. Further, they assert that the commercial community expects and desires this norm shift. This paper describes evidence which provides a contrary view. In short, it is argued that managers place a high degree of value on contractual certainty and look warily at doctrines which would appear to subvert certainty in favour of other values.
Original languageEnglish
Pages (from-to)8-22
Number of pages15
JournalJournal of law and financial management
Volume4
Issue number1
Publication statusPublished - 2005

Bibliographical note

Publisher version archived with the permission of the publisher Macquarie Graduate School of Management, Macquarie University, NSW, Australia. This archived copy is available for individual, non-commercial use. Permission to use this version for other uses must be obtained from the publisher.

Keywords

  • contract
  • good faith
  • outsourcing
  • alliances

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