Originally from the ICDR Handbook on International Arbitration & ADR - Third Edition

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I.    Introduction

Good faith is an exceedingly controversial concept both judicially and academically. Yet ironically, it is this doctrine that forms the underlying rationale for numerous other entrenched legal principles. These include misrepresentation, waiver, estoppel and forfeiture. This article will examine the scope of a party’s duty to negotiate or bargain in good faith. It is a duty consisting of two obligations. The first is to act “in good faith” and the second is the obligation to bargain.  The former is negative in content as it prohibits certain forms of bargaining behavior. The latter is positive in nature because it requires the parties to negotiate with a view to the actual conclusion of an agreement.

II.    The Concept of Good Faith

The cagey attitude that the Canadian academic and judicial communities frequently display towards “good faith” seems to suggest that it is some novel concept to which they must reconcile themselves. Nothing could be further from the truth. One of the modern roots of the good faith doctrine comes from Lord Atkinson’s dicta in New Zealand Shipping Co. v. Societe des Ateliers and Chantiers de France in which he held that, “…a person shall not be permitted to take advantage of his own wrong.” However, the concept of “good faith” is actually far more entrenched in history than this. The doctrine has been traced back to the Romans who summarized the concept with the expression “pacta sunt servanda” or, “what is so suitable to the good of mankind as to observe those things that parties have agreed upon.”