ENGLISH COMMERCIAL LAW

English Commercial Law

English Commercial Law

Introduction

There is a general principle that if a contract is formed in an unfair way, it is not the duty of the court to rescue the party being affected by the contract. If the court began rescuing people from such contracts, there will be an influx of people demanding that their contracts should be scrutinised. This will lead to the court being overburdened and there will be no way to prove which party is correct. Therefore, it is for the best interest of the public that such a clause is not included in the English commercial law.

European Approach

In countries such as Italy, France, and Germany, it is the responsibility of the parties to a commercial contract to ensure everything is done is good faith. In other words, the law required everyone to be reasonable and honest in the negotiations while entering into a contract. Although parties may be free to engage in a contract on the basis of their own interest, good faith should act as a limitation on the advantage gained in a contract. Therefore, if a party does not act in good faith while forming the contract, the other party will have the right to make amendments to it in order to benefit both parties.

English Hostility

Throughout history, English commercial law has been against the concept of good faith as it would lead to major issues for the court. Being hostile in good faith will prevent the commercial law to be undermined. Therefore, the English High Court does not recognize the fact that parties should act in good faith while making contracts. However, there is a provision that the duty of good faith to be applied in certain circumstances as in the case of Yam Seng PTE Ltd v International Trade Corp Ltd.

Yam Seng PTE Ltd v International Trade Corp Ltd

This case was concerning an agreement between a Singaporean distributor and a supplier of fragrance branded by Manchester United. The distributor claimed that the supplier committed a breach of contract since he provided false information, undercut the agreed prices, and failed to deliver the products on time. He also claimed that the contract contained an implied term which stated that the parties would act in good faith throughout the deal.

The judge claimed that it is not possible to include an agreement of good faith in every contract but it can be applied wherever possible. Therefore, since this contract has a term that both the parties would act in good faith, it becomes binding and the court can take action if this term is not met.

Potential Problems

Some of the potential problems of including this clause in the laws are that firstly, it will be very difficult to prove whether or not a contract was formed on the basis of fair dealings. For instance, the mode of delivery of an ordered item may be communicated verbally. Therefore, if one party fails to fulfil his promise, there will be no way to determine which of the parties ...