Electronic Agents and Contract Performance: Good Faith

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Electronic Agents and Contract Performance Good
Faith Fair Dealing

• Emily M. Weitzenböck, LL.M. (Soton), LL.D.
  (Malta)
• Norwegian Research Centre for Computers Law
• University of Oslo
• emily.weitzenboeck_at_jus.uio.no
• 1st Workshop on the Law of Electronic Agents,
  LEA 2002
• University of Bologna, Italy
• 13th July, 2002

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1. Topics for Discussion

• Introduction
• Good faith as a guideline for contractual
  behaviour
• Briefly on precontractual duties of good faith
• Good faith in contract performance
• Civil law notion of good faith
• Is there a duty of good faith in common law
  countries?
• Where contracts are negotiated by agents, these
  would have to conform to such standards of
  behaviour

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2. Precontractual duties of good faith (1)

• Both civil and common law systems regard the
  freedom of contracting parties as sacrosanct
• What if a contract not perfected or is invalid
  because of blameworthy conduct during
  precontractual stage?
• Development of doctrine of culpa in contrahendo
• Standards for precontractual behaviour
• Duties of disclosure (obligations dinformation)
• Precontractual liability
• sudden and unjustified rupture of negotiations
• no real intention to contract

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2. Precontractual duties of good faith (2)

• English law
• No general duty to negotiate or perform in good
  faith
• BUT developed piecemeal solutions in response
  to demonstrated problems of unfairness
  (Interfoto, QB 1989)
• No duty of disclosure in negotiation stage save
  for fiduciary contracts
• BUT where this amounts to negligent
  misstatement or fraudulent representation, remedy
  available in tort
• Notion of implied terms
• Silence could be problematic where info relates
  to a fact that is deemed to be an implied term

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2. Precontractual duties of good faith (3)

• English law (cont.)
• Harrison (1997) twin duties of candour and
  accuracy
• Precontractual breach of duty has no effect
  unless a contract has been made
• Re sudden and unjustified rupture of negotiations
  or no real intention to contract - basis of
  recovery on
• Collateral contract, restitution and law of torts
• Whether or not common law courts ultimately
  embrace good faith, there is an inherent strength
  in the common law to police bad faith (Furmston,
  1998)

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3. Good faith in contract performance (1)

• Origin in bona fides
• German BGB 242
• The debtor is bound to perform according to the
  requirements of good faith, taking into
  consideration ordinary practice in commerce.
• Treu (faithfulness, loyalty, fidelity,
  reliability) und Glauben (faith or reliance)
• Italian Codice Civile
• Good faith required in negotiation (art. 1337)
  performance (art. 1375). Art 1175 on obligations
  in general provides that debtor and creditor
  shall behave in accordance with the rules of
  fairness (correttezza)

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3. Good faith in contract performance (2)

• French Code Civil Art. 1334, para. 3
• Contracts must be performed in good faith
• (i) duty to act loyally (obligation de loyauté)
• (ii) duty to co-operate (devoir de coopération)
• Developed other notions founded on good faith,
  e.g. abus de droit
• Principles of European Contract Law
• Duty of good faith in formation, performance and
  enforcement of parties duties under a contract
• Duty to co-operate in order to give full effect
  to the contract

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3. Good faith in contract performance (3)

• What about electronic agents?
• How can characteristics of honesty,
  faithfulness, loyalty, fidelity,
  reliability be portrayed by electronic agents?
• Good faith and fair dealing are objective
  concepts which refer to the behaviour of the
  honest businessman (Betti).
• France in assessing whether the debtor of an
  obligation acted loyally, the court will examine
  whether he acted as a bonus paterfamilias.

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3. Good faith in contract performance (4)

• Common law
• Steyn LJ
• Good faith has a subjective requirement - the
  party must act honestly
• AND an objective standard the observance of
  reasonable commercial standards of fair dealing
  in the conclusion and performance of the
  transaction concerned. Used in this sense,
  judges in the greater part of the industrialised
  world usually have no great difficulty in
  identifyng a case of bad faith. It is not clear
  why it should perplex judges brought up in the
  English tradition.

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3. Good faith in contract performance (5)

• Common law (cont.)
• US UCC section 1-203 obligation of good faith
  in the performance or enforcement of contract
• Mirrored in Restatement of Contracts Second -
  205
• Every contract imposes upon each party a duty of
  good faith and fair dealing in its performance
  and its enforcement.
• Good faith is defined in the UCC as
• honesty in fact in the conduct or transaction
  concerned
• In the case of a merchant, good faith means
  honesty in fact and the observance of reasonable
  commercial standards of fair dealing in the
  trade.
• The emphasis here is on conduct and not on
  (subjective) intentions.

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4. Final considerations

• Focus on the objective requirement of good faith
• Whether the agent has observed reasonable
  commercial standards of fair dealing in the
  negotiation and performance of the contract
• Twin duties of loyalty and co-operation should be
  given an objective interpretation
• Choice of the electronic agent for a particular
  use
• Electronic agents need to reach a more
  sophisticated technical level than the
  state-of-the-art of today
• Need for secure and reliable agents