COMPARATIVE PRIVATE LAW GOOD FAITH

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COMPARATIVE PRIVATE LAWGOOD FAITH

• University of Oslo
• Prof. Giuditta Cordero Moss

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Case I Withheld information under formation

• A food producer sells one of its buildings
  (formerly a bakery, however not operative for
  some years) to a small baker.
• The seller knows that the buyer intends to start
  a bakery in that building, and knows that due to
  a recent change in regulations the building
  cannot be used for that purpose
• None of these circumstances is mentioned during
  the negotiations or in the contract

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Withheld informationBreach of precontractual
duty to disclose?

• English law no duty to disclose
• CISG (N/A) (?)

• Norwegian law duty to disclose loyalty
• German law good faith, duty to disclose
• Italian law good faith
• UNIDROIT, PECL good faith (?)

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Case II Distributorship affecting calculation
of royalty

• A licence agreement regulates the calculation of
  the royalty due to the licensor as a percentage
  of the price charged by the licencee to the
  distributor of the products
• The licencee establishes a wholly owned company
  and appoints it as distributor
• The price to the distributor is very low,
  therefore the royalty due to the licensor is very
  low
• The distributor makes a large profit the
  licencee benefits of the distributors profit

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Affecting calculation of royaltybreach of duty
to act in good faith?

• Norwegian law Duty to act loyally, duty of care
• German law Duty to act loyally, duty of care
• Italian law Duty to act in good faith
• Unidroit, PECL good faith (?)

• English law no duty to act in good faith
• CISG (N/A) no duty to act in good faith

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Possible aims of rules on good faith

• Ensure that relationships are fair beyond
  formulations in the contract
• Ensure exact and precise performance according to
  the terms of the contract

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Norwegian law

• Avtl. 33 a party is not bound if enforcement
  would be unfair because of circumstances known to
  the other partiy at the moment on entering into
  the contract
• Sale of goods act 19(1)(b) liability in sale
  as is, if lacking disclosure of material
  matters that could reasonably be expected and
  this has induced purchase
• General duty of care (hvtjl.), good faith

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German law

• 242 BGB good faith (also precontractual)
  implied duties to ensure accurate performance,
  implied limits to avoid abuse of rights
• 241 BGB duty of care protect the other
  partys rights or things, disclosure
• 442 BGB if fraudulent non-disclosure, buyer
  does not loose remedies even if acted with gross
  negligence

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Italian law

• Art. 1175 CC good faith
• Art. 1337 CC good faith in negotiations
• Art. 1375 good faith in performance. Implied
  duties to ensure accurate performance
• Art. 1491CC buyer looses remedies if negligence.
  Fraudulent non-disclosure exemption clause not
  valid (1490)

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English law

• No duty of disclosure
• Mere silence is not equal to misrepresentation
• Duty to perform contract exactly and precisely
  according to its terms

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CISG

• No general duty of good faith
• 7. (1) In the interpretation of this Convention,
  regard is to be had to its international
  character and to the need to promote uniformity
  in its application and the observance of good
  faith in international trade.
• Art. 35
• Requirements contained in the contract
• Ordinary purpose
• Particular purpose expressly or impliedly made
  known to seller
• Only if reasonable to expect that seller judges
• Only if buyer did not know or could not have
  known

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UNIDROIT

• Art. 1.7 Duty to act in good faith
• To be determined according to standard in
  international trade

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PECL

• Art. 1201 Duty to act according to good faith
• Art. 1202 Duty to cooperate
• Not to be determined according to national
  standard

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Good faith international standards

• http//www.tldb.de/
• Legal doctrine
• Arbitral awards (mainly corroboration)
• Principles
• CISG
• National court decisions
• National Legislation
• Contractual practice?

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Common features

• Misrepresentation
• Fraudulent silence misrepresentation?

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Parties duty to act according to good faith