A revised role of good faith in the law of contract and employment contracts

Abstract

Good faith is an open ended concept which refers to fair and honest dealings. The function of this concept is to give expression to the community’s sense of what is fair, just and reasonable. The concept of good faith has and continues to acquire a meaning wider than mere honesty or the absence of subjective bad faith. It is an objective concept that includes other abstract values such as justice, reasonableness, fairness and equity. There is competition between the two underlying values or cornerstones of the law of contract, namely that of sanctity of contract (pacta sunt servanda) and fairness. Y Mupangavanhu holds that ‘it is becoming axiomatic that sanctity of contract and fairness are competing values that need to be balanced by courts’. Differently put, Hutchison holds that: ‘The tension between these competing goals of contract law is quite evident…every time a court enforces an unreasonably harsh contractual provision, a price is paid in terms of the ordinary person’s sense of what justice requires; conversely every time a court allows a party to escape liability under what is thought to be a binding contract, a price is paid in terms of legal and commercial certainty’. Courts are often called upon to assess the abovementioned tension. South African courts have, however, shown reluctance in balancing the competing principles and have instead been opting to uphold the principle of sanctity of contract in the spirit of preserving certainty in the law of contract. Public policy, ubuntu and good faith are all mechanisms that are aimed at achieving fairness in contract law. The apparent preference of the courts to uphold the sanctity of contract above all else, falls short of achieving fairness and reasonableness. Public policy functions as an alternative doctrine of equity, fairness and good faith in contract law. As such, the idea is that a contract that is contrary to public policy is illegal and should not be enforced. Although there is no clear definition of public policy, B Mupangavanhu opines that the ‘doctrine of public policy, while difficult to comprehensively define, can be understood to refer to courts consideration of what is in the interest of society or community when interpreting contracts’. In other words, it represents the legal convictions of the community or the general sense of justice of the community and the values that are held most dear by the society.