{"id":196414,"date":"2026-03-20T02:34:33","date_gmt":"2026-03-20T02:34:33","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=196414"},"modified":"2026-03-23T02:51:54","modified_gmt":"2026-03-23T02:51:54","slug":"good-faith-in-business-contracts","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/regulatory-compliance\/good-faith-in-business-contracts\/","title":{"rendered":"Do You Have to Act in Good Faith in Business Contracts?"},"content":{"rendered":"\n

If you supply goods or services, you need to understand how \u201cgood faith\u201d operates in your contracts. Customers often ask you to include good faith clauses, but these clauses can create real legal and commercial risk if you accept them without careful drafting. You should treat these clauses as legally significant, not just commercial formalities. This article explores a high-level introduction to legal issues relevant to good faith and how your business should approach negotiating such clauses in your business-to-business contracts.<\/p>\n\n\n\n

Does English Law Require You to Act in Good Faith?<\/h2>\n\n\n\n

English contract law prioritises freedom of contract<\/a>. This means you can pursue your own commercial interests, if you act within the terms of your agreement.<\/p>\n\n\n\n

Unlike some other legal systems, English law does not recognise a general duty of good faith. You are not automatically required to act \u201cfairly\u201d or \u201creasonably\u201d unless your contract says so.<\/p>\n\n\n\n

However, good faith can still arise in two key ways.<\/p>\n\n\n\n

1. You can create an express obligation by including a good faith clause in your contract. If you agree to such a clause, you must comply with it.<\/td><\/tr>
2. Courts may recognise more limited duties in specific situations. These typically arise in long-term, collaborative arrangements such as joint ventures, franchise agreements or distribution relationships. In these cases, the court may treat the contract as a \u201crelational contract\u201d and imply obligations of honesty and cooperation.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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There is also a related concept known as the Braganza duty. If your contract gives you discretion that affects both parties, you must exercise that discretion honestly and not arbitrarily or irrationally. These exceptions are narrow, but they can have serious consequences if they apply to your contract.<\/p>\n<\/div>\n\n\n\n

What Does a Good Faith Clause Mean in Practice?<\/h2>\n\n\n\n

A good faith clause<\/a> usually requires you to act honestly and cooperate with the other party. However, there is no single definition. The meaning depends entirely on the wording of the clause and the context of the contract.<\/p>\n\n\n\n

If the clause is vague, a customer may argue that you acted unfairly or failed to cooperate, even where you believe you acted within your commercial rights.<\/p>\n\n\n\n

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For example, a broadly drafted clause could limit your ability to enforce strict contractual rights, <\/span>make commercially advantageous decisions and prioritise your own business interests in negotiations or performance.<\/p>\n<\/div>\n\n\n\n

Once included, a good faith clause can become a tool for disputes. It can give the other party grounds to challenge your decisions and potentially bring a claim.<\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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