This Practice Note considers good faith in commercial agreements. It examines the concept of good faith and the extent to which it is applied in commercial agreements either as an express term or an implied term and in the context of relational contracts. It also considers agreements to negotiate in good faith, the approach to the duty of good faith in other jurisdictions, the application of Braganza duties in commercial agreements, and provides some drafting considerations in respect of good faith provisions.

The traditional approach adopted by English courts has been to avoid implying a duty of good faith into commercial agreements and ‘if parties wish to impose a duty [of good faith] they must do so expressly’ (Mid Essex Hospital Services). However, the courts may be prepared to imply a duty of good faith in some instances, either by applying a conventional approach to the implication of terms or, as appears from the decisions in Yam Seng Pte Limited v International Trade Corporation and Bates v Post Office Ltd, in certain types of