Deals - Assume That You Have a Duty of Good Faith

We all try to do the right thing and act honorably even if it includes some sacrifice on our part.  For instance, if you make a bargain you stick to it. 

However, in business it normally depends on exactly how much sacrifice.  Usually, if it is going to cost under say two thousand dollars most people, not all, will reluctantly grin and bear it.  Over that amount clients want their lawyer to find a loophole in a contract.

Contracts are usually signed and then put in a drawer.  In the event of a dispute the contract is retrieved and poured over, with a view to either enforcing it against an unwilling party or getting out of it, if you happen to be that unwilling party.

There are eight things you should know to avoid problems with the deals that you enter into or at least give you an advantage in your approach.

Here is the first one - 

Assume that you have a duty of good faith

There is some argument about whether or not parties entering into a contract owe a duty of good faith to the other. It flies in the face of caveat emptor (let the buyer beware).   It may be better to say you have a duty not to act with bad faith.

But for your purposes it is best to assume that the parties to a contract must not do anything to hamper the other achieving the benefit intended under the contract i.e. if you make a bargain you must stick to it.

If a judge thinks that you deliberately scuppered the deal you will probably lose.   Therefore, the more desperate you are to get out of the deal the more enthusiastic your lawyer must appear to carry it out.  Meanwhile, the opposing lawyer will try to look through your lawyer’s enthusiasm for signs of treachery. 

Fortunately, for the desperate party, contracts rarely turn out the way that the parties planned.   With a bit of luck your lawyer may be able to allow you a dignified exit from the contract claiming it was the other party’s fault.  Your lawyer only needs to raise enough doubt to make the other party think twice before suing you.

This explains why your own lawyer is so negative and paranoid.  If you had to put up with this sort of thing year after year, decade after decade, you would be miserable and cantankerous too.

© Paul Brennan 2018. All rights Reserved.

Extract from "The Art of War, Peace & Palaver: The Contentious Guide to Legal Disputes" by Paul Brennan

Listen to this article on the Law podcast 


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