I. Introduction

In Bhasin v Hrynew, Justice Cromwell said the following:

Australian courts have … moved towards a greater role for good faith in contract performance …. There is no generally applicable duty of good faith but one will be implied into contracts in certain circumstances …. The law of good faith performance in Australia is still developing and remains unsettled.[1]

Five years later, this assessment remains valid, although there have been, through judicial decisions and legislation, topical developments that have led to the recognition of a duty to act in good faith in certain contracts, as this article will demonstrate. Indeed, good faith has been recognised by some state courts, but there is no general principle or duty applicable to all contracts. Courts are also not certain whether to imply good faith as a matter of fact or in law in certain classes of contracts. Academic commentary in this area of law is very divided, proving it is still a live issue almost 30 years after Renard was decided.

This article will provide an overview of the issue in Australia and compare the language used in Bhasin with the concepts laid out in Australian contract law. By taking a chronological approach, this article will demonstrate that Australian contract law is moving towards the recognition of good faith in some manner, but there is still a long way to go before we can talk of an Australian principle of good faith similar to the one laid down in Bhasin. This article will present the current state of good faith in Australian contract law through its different recognitions in legislation and case law. It will then compare the rationale of these examples with Bhasin’s model. It will expose the lack of leadership and highlight the close relationship between cooperation, honesty and good faith. While the content of a duty of good faith has been difficult to determine, honesty is often used to give substance to good faith in Australian contract law, both through statutes and case law. Australia is at a crossroads, and this article will end with a reflection on how it could move towards recognising and enforcing a principle of contract law, should it decide to take such a path.

II. Looking Through Canadian Glasses

One of many interesting aspects of the case of Bhasin v. Hrynew was the development of an organising principle of good faith, not a duty. The main points of the Canadian Supreme Court can be summarised as follows: in Canadian contract law, there are organising principles, seen as a requirement of justice. These are standards that underpin and are manifested through more specific legal doctrines. One such an organising principle is good faith. While there is no strict definition of the legal principle, there are pointers regarding its contours. Under such a principle, a party is to have regard to the legitimate contractual interests of the contracting partner, although it does not require acting to serve those interests. Good faith requires a party not to undermine those interests in bad faith. A clear distinction was made between good faith on one hand and loyalty and associated fiduciary duties on the other.[2] Under this umbrella principle, the duty of honest performance was imposed on both parties, and ultimately this duty was held to have been breached by Bhasin.[3] This went beyond the decision by the trial judge to imply a term of good faith in contract performance by analogy to employment contracts. Should one party be in a more vulnerable position compared to the other party, the former’s vulnerability should be taken into consideration. A consequence of this approach was that even in instances where there is an entire agreement clause, such a clause will not be enforced if there is an imbalance of power and therefore it would be unjust or inequitable if enforced.[4]

Such a decision seems to blur notions of what is equitable and what is right in law. It is this lack of clear definition and contours that puts many academics ill at ease when considering introducing good faith in contract law. Mixing morality and law comes with many dangers. In fact, much of the discussion surrounding good faith in Australian contract law is about rejecting the input of morals and taking a very holistic approach to party autonomy and the freedom of the parties to choose to contract, including the freedom to not act in good faith if they so wish. Despite these approaches that will be discussed later in this article, good faith is already part of the Australian contract legal regime, albeit only in particular circumstances.

III. How Good Faith Resonates Within Australian Contract Law

The reality of the Australian context is grasped within the decision of Bhasin v Hrynew.[5] In spite of some pro-commentary and some cases, there is not yet a clear position on good faith in Australian contract law. The challenge revolves around how such a duty of good faith could be applied in a manner consistent with the common law that would respect the parties’ self-interest to a contract. For more than 30 years, this seems to be what has plagued the reasoning of the courts.

A. Case Law

Before analysing the case law in this area, it is worth recalling the steps needed to imply a term as a matter of law, as a matter of fact, or through the broader construction of contract. Firstly, in order to imply a term as a matter of law, a specific category of contracts must be identified,[6] the category to which the duty to act in good faith would apply. Commercial contracts are not considered a class of contracts certain enough: the notion of what a commercial contract is has yet to be determined. However, certain commercial contracts are subject to the implication in law of a duty of good faith, as typified by franchise agreements in Australia. However, courts have yet to take a stand on the implication of a duty to act in good faith, as the class of contracts to which it would apply it has yet to be determined. Secondly, in relation to the implication of terms as a matter of fact, business efficacy and obviousness are core determinants in deciding whether to imply a contractual term. Although it would seem obvious that parties that agree to enter into a contract will perform their obligations under the agreement fairly, the issue relating to the recognition of good faith “reveals the circularity that can attend rejection of an implication of good faith because of the need to show necessity for business efficacy”.[7] Finally, construction of the contract determines the wording and legal effect of contractual terms. Through this process, good faith has been identified as the essence of the contract.[8] This does not include every aspect in the life of a contract. It does not apply to negotiations.

Courts have had to decide on whether a duty to act in good faith could be excluded within the terms of the contract. Yet in some circumstances, courts could consider such an exclusion unfair. While Australian courts have shown that they are more likely to implement the terms of the contract,[9] a recent judicial decision showed that they are not afraid to strike down a clause should Australian Consumer Law (ACL) apply.[10] The relevance of this legislation regarding good faith will be discussed later in this article. It is however important to start with a description of the case law that preceded these legislative developments.

B. A Slow Development

The development of good faith began with the recognition of the duty to cooperate. Cooperation in performance relates to enforceable contractual obligations and requires reasonable acts of cooperation. The meaning of cooperation was lain down in Mackay v Dick: “It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract”.[11] The English case of Butt v McDonald cemented such an understanding,[12] and the duty to cooperate in the performance of a contract is a well-established rule in Australian contract law also.[13] Such a recognition in Australia extended beyond the strict performance of the contract, meaning that each party should be able to benefit from the transaction. This was affirmed by the High Court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd, where Justice Mason stated that a duty to cooperate is necessary for fundamental obligations to be performed.[14] Whether parties have breached that duty must be determined from the intentions of the parties as manifested by the contract.[15]

In 2006, Justice Giles considered the duty to cooperate to mean acting reasonably and in good faith.[16] The court found that the appellant did not act in good faith in the sense of honesty, nor did it act reasonably.[17] The link between cooperation and good faith as a means to ensure cooperation between the parties was established. However, the judge also highlighted that the duty to cooperate “is not a mechanism for alleviating the consequences of hard, even harsh or unconscionable, contractual provision”,[18] such that legislation has now stepped in to regulate unfair contract terms for both consumers and small businesses.[19]

It is commonly agreed that parties can exercise their rights as long as such exercise remains within the frame of the contract. Through the duty to cooperate, parties must, however, take a reasonable approach by considering the interests of the other party in making decisions. For instance, if a right to terminate is a right stipulated in the contract and can be used at the discretion of a party, it must be exercised fairly. In Renard Constructions,[20] the New South Wales Court of Appeal decided that when a discretionary right is an explicit term of the contract, the discretionary power involved with triggering the application of such a clause requires such power to be exercised reasonably, not capriciously or for some extraneous purpose.[21] Justice of Appeal Priestley discussed at length the concepts of reasonableness and good faith. He considered there to be a “close association of ideas between the terms unreasonableness, lack of good faith and unconscionability”.[22] Renard is said to mark the start of the implication of good faith in Australian contract law.[23] However, although it developed the idea of recognising good faith in contracts using construction techniques, it did not clearly state whether good faith could be implied in law or in fact.[24] This case was followed by other courts, but it is the requirement for parties to act reasonably and not capriciously or for some extraneous purpose that was used, not the obiter on good faith.[25]

Yet as time went by, the concept of cooperation was associated with good faith.[26] The duties to cooperate and to act in good faith apply to both the performance of obligations and the exercise of rights. In Alcatel v Scarcella,[27] the New South Wales Court of Appeal accepted that a duty of good faith, requiring co-operation, could be implied as part of a lease.[28] The case dealt with requirements for fire safety as prescribed by a fire engineer. The landlord required the work to be carried out by the appellant, the tenant. The tenant argued it was not the duty of the court and that the landlord was acting unconscionably. The trial judge found an implied term of cooperation and fair dealing. Through a careful analysis of the facts and the legal requirements for the building to be fire safe, the trial judge found that the landlord acted reasonably. The New South Wales Court of Appeal followed his opinion by applying the following test: (1) Has the building owner pressured the authorities relating to safety orders in order to force the tenant to comply with them, as it is an obligation of the tenant to observe and perform lawful requirements? (2) If so, is it a breach of the clause in the contract relating to maintaining the premises in good substantial repair? The first answer was affirmative, but the second was negative. The owner had legitimate interests in making sure the building was fire safe.[29]

It is worth noting the impact of the scholarship on decisions. One famous meaning of good faith by Justice Mason was used by Chief Justice Bathurst in Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd, in which he stated that the content of a duty to act in good faith “has commonly been held to embrace three related matters: 1. An obligation on the parties to co-operate to achieve the contractual objectives. 2. Compliance with honest standards of conduct. 3. Compliance with standards of conduct that are reasonable having regard to the interests of the parties”.[30]

1. Good faith and franchises

Since 1999, particular contracts have attracted a discussion of the concept of good faith in contract law: namely, franchise agreements. The discussion has less to do with what duties are owed and more to do with how rights are exercised. For instance, regulating discretionary obligations is illustrated by the reasoning of Justice Filkenstein in Garry Rogers Motors (Aust) Pty Ltd v Subaru Pty Ltd.[31] There, even though a duty of good faith could be implied,[32] it had not been breached in the decision by the franchisor to terminate the relationship.[33] The standard to be applied to the exercise of contractual powers here is the implied duty not to exercise powers capriciously or for an extraneous purpose.[34] However, an important point highlighted by the judge was that “[m]any relationships can only operate satisfactorily if there is mutual confidence and trust”.[35] This is the basis for a reasonable exercise of discretionary obligations.

Good faith in franchises also led to the clarification that cooperating does not mean acting selflessly. A party is not required to disregard its own interests. This is illustrated in Far Horizons v. McDonalds.[36] This case involved a franchise to Far Horizons. McDonalds decided to open a new restaurant not far from theirs, which was likely to decrease customers at Far Horizons and reduce its profits. Opening a new store was a right that McDonalds could exercise by virtue of the nonexclusive contract with Far Horizons. The court found that the franchisee failed to show that the franchisor acted improperly and was motivated by an extraneous motive. This case shows that even though it seems that parties developed conflicting interests, there was nothing in the contract or the contractual behaviour of the franchisor that prevented it from opening a competing store.

In the 2001 case of Burger King v Hungry Jack’s,[37] the New South Wales Court of Appeal was faced with a decision on the construction of a termination clause in a franchising contract. A franchisor’s discretion relating to approvals was subject to an implied duty of good faith, consequently precluding the franchisor from exercising the termination for extraneous purposes. The franchisor breached his implied duty by imposing a one third party freeze and financial approval withdrawal. The Court decided that there was wrongful termination.[38] The court recognised the application of an implied duty to act in good faith as a matter of law and not of fact.[39] The agreement had developed with implied terms of cooperation, good faith and reasonableness, meaning conforming to "an honest person’s view of what would constitute fair dealing".[40] The court considered that "the franchisor was acting as part of a 'deliberate plan to prevent the [franchisee] expanding" and instead to enable the franchisor itself ‘to develop the Australian market’".[41]

2. The High Court dilemma

Besides the lower courts’ obiter on good faith in contract law, the High Court has been very silent and has yet to seize the opportunity to clarify their position on the common law of Australian contract law.

Ten years on from Renard, in Royal Botanic,[42] the High Court of Australia missed an opportunity to develop the principle of good faith in contract law. Only Justice Kirby discussed (obiter) the difficulty of implying good faith in contract law. The High Court has yet to take a judicial position on a duty to act in good faith and the legal basis for such a concept: a mandatory law, an implied term as a matter of fact or of law,[43] or an interpreting principle.[44] In Royal Botanic Gardens and Domain Trust v South Sydney City Council,[45] the High Court of Australia had to decide on the construction of terms of a lease agreement and, more specifically, the construction of the clause with the expression “with regard to additional costs and expenses”.[46] The clause was held to be ambiguous, and it was stated that parties should lay out an exhaustive list of possible reasons for any rent increase in the clause in dispute. Both parties agreed on the implication of a duty of good faith performance of the contract through construction of the contract as a whole. Consequently, the Court did not consider the content of the duty in detail. Yet the decision has been criticised widely for the lack of clarification from the High Court, given the golden opportunity presented.[47]

In 2014, the High Court argued that the lack of pleadings prevented it from discussing good faith in contract law. The case of Barker, an employment-related case, created much debate when the notion of good faith reappeared. While good faith was discussed in obiter, it was not ultimately the ground for the decision, perhaps rightfully so.[48] The lack of clarity was highlighted: “whether there is a general obligation to act in good faith in the performance of contracts [and] whether contractual powers and discretions may be limited by good faith and rationality requirements are still open questions.”[49]

This chronological retrospective shows that courts have dealt with the regulation of parties’ behaviour within a contractual relation: the duty to cooperate. This duty can imply that a party use its “best efforts in performing their obligations”.[50] But it is also “tainted” by notions of reasonableness.[51] Reasonableness is a concept that is used in Australian contract law to tackle contractual behaviour and ensure parties act fairly, a case in point being the reasonable exercise of contractual powers that arise in the context of the termination of contracts. Australia has enforced a duty to cooperate and exercise discretionary rights in a reasonable manner. Good faith seems to be the underlying, or dare I say organising, principle that is constantly in the background of these discussions. One of the issues with a duty to act in good faith is how to imply it: a matter discussed in Bhasin[52] and not settled in Australian contract law.[53] It sometimes makes it to the foreground as exemplified in Renard. This shows that the concept is not totally foreign to Australian contract law. Yet the relationship between cooperation, reasonableness and good faith has yet to be determined.[54] The courts have shown reluctance in approaching the term of good faith and even more in implying and interpreting it. From building contracts[55] to franchising,[56] Australian businesses have opened the door towards recognition of good faith as a duty applicable in commercial contracts through the inclusion of good faith clauses in their contracts. This has forced the courts to confront an issue on which they have yet to take a stance.

3. Legislation

The intention to create legal relations, a core requirement to the formation of a legally enforceable contract, is presumed in the context of commercial agreements. Ideally, when two business parties enter into negotiations, they both intend to use their best efforts to reach an agreement. If one party to a contract is shrewder and more cunning and out-manoeuvres the other contracting party, which did not suffer a disadvantage and was not vulnerable, it is difficult to see why the latter should have greater protection than that provided by the law of contract.[57] Legislation has intervened to ensure this imbalance of power is not used against a more vulnerable party. According to Section 51 of the Australian Constitution, Parliament has the power to legislate on trade and commerce with other countries and among the states. Yet the role of Parliament in enacting statutes and broader concepts than the ones used by the courts has led to the blurring of the lines between common law and civil law.[58] Good faith is part of upwards of 150 Australian statutes. Not all refer to Australian contract law but may refer to broader areas, from corporate law to native title. This next section develops the most relevant provisions to the discussion of this article: good faith in Australian contract law.

In Australia, the most complete statute on contract law is contained in the Australian Consumer Law (ACL). Yet the title of this body of rules is confusing, as some provisions also cover businesses.[59] Most relevant to this article is Section 21, which states that “a person must not, in trade or commerce, , in connection with (a) the supply or possible supply of goods or services to a person (other than a listed public company) or (b) the acquisition or possible acquisition of goods or services from a person (other than a listed public company)”. To determine the unconscionable conduct by such a person, the court can have regard to the non-exhaustive list of factors in Section 22(1) of the same act. This list includes the relative strengths of the bargaining positions of the supplier and the customer; whether, because of the conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and, most importantly here, the extent to which the supplier and the customer acted in good faith.

Finn argues that good faith is already part of the ACL in Section 22 ACL and applies to all parties to the contract: "Statutory unconscionability present trajectory is in the direction of proscribing unfair dealing and unfair trading reinforced by statutory indicators of a like kind that concentrate upon discriminatory treatment, industry code compliance and good faith".[60] The issue with this proposition is that it makes good faith dependent on unconscionability. However, the principle is much broader and should consequently embrace unconscionability rather than the other way around. This means that good faith is an umbrella principle under which current piecemeal solutions that tackle unfair behaviour evolve. Instead of presenting unconscionable risk factors, the mention of good faith gives further discretion to the courts and their interpretation of the provisions and further emphasises fair dealing.[61]

4. Mandatory codes of conduct

Besides the Australian Consumer Law, the open use of fairness and honesty have allowed for the establishment of minimum levels of commercial good faith. In ongoing business relations, the development of power asymmetry over time is more likely. Codes of conduct, both voluntary and mandatory, have made explicit the duty of good faith owed in certain commercial transactions. The prime example of such situations is the case of franchise agreements and is examined first. This article will then lay out other codes of conduct that impose a duty for parties to act in good faith.

It is important to note from the outset that there are two types of industry-specific codes of conduct. Mandatory codes of conduct are prescribed by legislation. This is the case of four codes of conduct in Australia that are mandatory, based on the application of Section 51AE of the Competition and Consumer Act, which provides the following:

The regulations may (a) prescribe an industry code, or specified provisions of an industry code, for the purposes of this Part; and (b) declare the industry code to be a mandatory industry code or a voluntary industry code; and (c) for a voluntary industry code, specify the method by which a corporation agrees to be bound by the code and the method by which it ceases to be so bound (by reference to provisions of the code or otherwise).[62]

Voluntary codes of conduct, on the other hand, are applicable on an opt-in basis. “Voluntary” allows for the principles of private international law to function and does not fundamentally disrupt the law of contract as it is currently laid out.

a. The Franchising Code of Conduct

The Australian Franchising Code of Conduct provides guidance to matters the court may have regard. In this instance, determining whether a party has acted in good faith will include whether the party is "acting honestly and not arbitrarily",[63] in line with the association of good faith with honesty. The Australian Franchising Code of Conduct also describes good faith as mandating that the parties act cooperatively to achieve the agreement’s purposes.[64]

Franchise agreements are long-term contracts whose relational characteristics lead to a movement towards the implication of a duty of good faith as a matter of law, as we saw earlier.[65] Australian courts have enforced good faith in situations where the imbalance of power in the relationship and the vulnerability of the franchisee were exposed. In Garry Rogers Motors (Aust) P/L v. Subaru (Aust) P/L,[66] the court found that the termination was unconscionable and in breach of s51AC of the then Trade Practices Act. In Burger King Corp v Hungry Jack’s Pty Ltd,[67] the NSW Court of Appeal decided upon the construction of a termination clause in a franchise agreement. The court held that Hungry Jack’s had wrongfully terminated the contract by considering that good faith was an implied term in law. The agreement had developed with implied terms of cooperation, good faith and reasonableness.[68] In Far Horizons Pty Ltd v McDonalds,[69] Byrne J in the Victorian Supreme Court held that an implied duty of good faith existed in franchise agreements. Good faith was understood as “the reasonable exercise of powers: not capriciously or for some extraneous purpose”.

The reform of a code of conduct for franchising contracts has led to the recognition of the link between the importance of the relationship between the parties and the doctrine of good faith. Over the last decade, out of nine review processes, seven recommended the introduction of a duty to act in good faith in the Franchising Code of Conduct. A Western Australian 2008 report analysed the duty to act in good faith by providing an international overview, without recommending that such a doctrine be introduced.[70] The same year, a federal report recommended the introduction of an explicit obligation to act in good faith as an overarching standard of conduct.[71] Recognising “the inherent and necessary imbalance of power in franchise agreements in favour of the franchisor, where abuse of this power can lead to opportunistic practice, a statutory duty to act in good faith”[72] would “promote business integrity and ethics”.[73] The government rejected the introduction of a duty of good faith, stating that the doctrine was still evolving and such an introduction was considered likely to provide more uncertainty.[74] In 2010, a clause was inserted into the Franchising Code of Conduct stating the following: "Nothing in this code limits any obligation imposed by the common law, applicable in a State or Territory, on the parties to a franchise agreement to act in good faith."[75]

The application of the provision was analysed in a 2013 review led by Alan Wein, which ultimately led to the recommendation of a code amendment to include an explicit obligation to act in good faith.[76] The government accepted this term, and the new Franchising Code of Conduct came into force on 1 January 2015. It prescribes a duty to act in good faith. “Each party to a franchise agreement must act towards the other party with good faith, within the meaning of the unwritten law from time to time, in respect to any matter arising under or in relation to (a) the agreement and (b) the code. This is the obligation to act in good faith”.[77]

The code does not provide any definition of the obligation but does provide guidance to the courts. When determining whether a party breached the duty, courts can look at, among other matters, whether the party acted honestly and not arbitrarily and whether it cooperated to achieve the purposes of the agreement.[78] Interestingly, this shows the direct link between cooperation and good faith and highlights the validity of the foundation of good faith in contract law. Furthermore, the duty extends from the negotiations to the performance and termination of the agreement, recognising that cooperation starts from the time parties begin negotiations. It is understood that parties must have due regard to the rights and interests of the other party without sacrificing their own.[79] The Australian Competition and Consumer Commission considers that dishonest business dealings and acting for an ulterior purpose will be breaching the duty to act in good faith. The duty cannot be excluded.[80] The code is applied strictly by the courts,[81] and it is likely that the introduction of good faith in the Code will lead to judicial interpretation.

b. The Horticulture Code of Conduct

The wave of introductions of the good faith into codes of conduct also led to the reform of the Code of Horticulture in 2017. Section 8 states that traders and growers should deal with each other in good faith. This means that the parties should act honestly and not arbitrarily and that the relationship should not be conducted with duress.[82] Section 9 states that the obligation to deal in good faith cannot be limited or excluded.

6. Voluntary codes of conduct

a. The Food and Grocery Code of Conduct

A recent wave of codification of the duty to act in good faith can also been seen in voluntary codes of conduct. For instance, the Food and Grocery Code of Conduct’s purpose is “to promote and support good faith in commercial dealings between retailers, wholesalers and suppliers”,[83] by ensuring there is no duress.[84] It imposes a duty to act in good faith on the retailer and the supplier at all times.[85] In order to determine whether this duty has been breached, courts can take into consideration the following:

  1. whether the retailer or wholesaler’s trading relationship with the supplier has been conducted without duress;
  2. whether the retailer or wholesaler’s trading relationship with the supplier has been conducted in recognition of the need for certainty regarding the risks and costs of trading, particularly in relation to production, delivery and payment;
  3. whether, in dealing with the retailer or wholesaler, the supplier has acted in good faith.[86]

While the Code does not define good faith, there are indeed provisions to guide the courts in determining whether a party has contravened the section. Despite a recent review, it is too soon to determine the impact this introduction of good faith has had on the industry. When stakeholders were interviewed and asked what they understood as good faith, their responses reflected notions of fairness, cooperation and honesty.[87]

b. Building Standard AS11000

Finally, the chronological perspective above has demonstrated how the debate surrounding good faith in Australia really started with Renard and its construction contract. Interestingly, voluntary standards have also developed and a recent review of building standards has imposed a new explicit obligation on the principal and contractor “to act reasonably in a spirit of mutual trust and cooperation, and generally in good faith towards the other”.[88] This review ultimately led to the introduction of the duty to act in good faith as laid out in 1992 in Renard Constructions. Clause 2.1 of the standards states that “the Contractor and the Principal each agree that they: (a) in the performance of their respective duties (b) in the exercise of their respective powers; and (c) in their respective dealings with each other, will act in good faith”. The legal concept is now defined in the Dictionary of the Standards: “good faith in subclause 2.1 means, obligations by the Principal and the Contractor: (a) to act honestly and with a commitment to the agreement comprising the Contract; (b) Not to act so as to undermine the substance of the benefit to both parties of the agreement; and (c) to act reasonably having regard to the interests of both parties under the terms of the Contract”.[89] It is important to note once more that none of these obligations requires the interests of either party to be subordinated to those of the other party.

7. Small business transactions

Beyond these two topical approaches of voluntary code and standard, another movement is emerging to protect small businesses and here again the resurgence of good faith can be seen. “The business community is an eco-system: larger businesses need a healthy small business sector for their business to thrive”.[90] Commercial parties are supposedly on an equal footing when coming to the negotiating table. This idealistic proposition does not recognise the reality of small businesses that are not usually in a position to negotiate certain terms of these so-called boilerplate contracts. New offices have been established to provide small businesses with adequate protection. Small business Commissioners (SBC) are “… the primary vehicle for delivering on the Government’s commitments to enhance a competitive and fair operating environment for small business”.[91]

The Victorian SBC Office was set up in Small Business Commissioner Act 2003 (Vic).[92] His role includes facilitating and encouraging the fair treatment of small businesses in their commercial dealings with other businesses in the marketplace, as well as investigating complaints[93] by small businesses regarding unfair market practices and mediating between the parties involved in the complaint.[94] “Unfair market practice” is not defined. According to the SBC, it should be given the broadest possible meaning. It includes “any acts or omissions by any private sector or government entity in the course of business dealings or dealings related to business, regulatory or otherwise, within Victoria.”[95] This addresses the imbalance of power in contracts involving small businesses.[96] Other offices have been established since.[97] Of particular interest is the South Australian SBC. The office was established following the enactment of the Small Business Commissioner Act 2011. The Small Business Commissioner Act in South Australia clearly regulates the need for the parties to act in good faith, a duty that should be developed and explained through a code of conduct. Section 5(2) Small Business Commissioner Act 2011 (SA) states:

The Commissioner is to perform the functions with a view to the development and maintenance in South Australia of relationships between small businesses and other businesses, and small businesses and State and local government bodies that are based on dealings conducted fairly and in good faith.

The importance of the insertion of good faith was debated in Parliament, but a broad provision was finally laid out, leaving the SBC to define the contours of the provision.[98] The code has yet to eventuate. It was also made clear during the discussion of the bill that “[t]hat is not to say that all codes will have to have those good faith obligations”.[99] However, creating a separate class of trader for small businesses is the first step towards addressing the imbalance of power between small businesses and larger companies, although the definition of a small business itself is a matter for discussion.

III. The Real Issue in Australia: Piecemeal, Unsettled, Unclear? What Is Next?

This appraisal depicts Australian contract law in relation to good faith performance of contracts as “piecemeal, unsettled and unclear”.[100] This exact state of affairs contributed to the landmark Canadian judgment Bhasin v Hrynew to recognise good faith as an organising principle in Canadian contract law. While the justification of this fragmentation is different in Canada (due to civil law provinces) compared to Australia, it highlights some of the issues yet to be settled in Australia. The lack of a principle of good faith is in itself not enough to justify change in Australian contract law, yet there are questions regarding whether the gap between the law and the expectations of contractual parties is widening.

A. The Academic Debate Rages

In Australia, the question of reforming contract law brings the place of good faith in contract regulation back into the spotlight. Both Australia and the European Union have recently considering reform options for all or a substantial part of their contract laws. In March 2012, the Attorney General’s department’s discussion article on the possible reform of Australian contract law referred to good faith as an “unclear”[101] principle. Later in 2012, short guidance documents called “infolets” were released to supplement the article and guide the discussion. These make direct references to good faith and the question of its explicit recognition in a common-law country.[102]

The scholarly debate is wide-ranging, from the rejection of the incorporation of good faith in Australian contract law to divergence on what the legal basis for the doctrine should be.[103] This debate is not limited to Australian shores. The names of Bridge and Teubner come to mind easily when discussing good faith in contract law in common-law countries.

As the chronological review above demonstrated, Australian courts are yet to recognise a duty of good faith in the general law of contracts. Beyond the difficulty in finding a way to recognise such a concept and implement it in the general law of contract, there is also a clear reluctance from judges to delineate what good faith might mean. This is probably what the most difficult point regarding good faith for a common law jurisdiction, like Australia. For instance, Handley JA, albeit in the minority in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd stated that there were no criteria that could help determine what good faith could mean, ultimately stating that “a promise to negotiate in good faith is illusory”.[104] Gummow J in Service Station Association ltd v Berg Bennet & Associates Pty ltd stressed upon the point that recognising an implied duty of good faith and fair dealing require a “leap of faith”,[105] going much further than where Equity has come to restrict contractual freedom as was discussed above.

In academic scholarship in Australia and beyond, a similar sentiment is felt when the topic of good faith in contract law is approached. For instance, good faith has been presented as an elusive idea, taking different meanings and emphasises in different context.[106] Teubner famously describes good faith as a legal irritant, whose implementation in English law through EU directives would start a domino effect on contract law, “irritate British legal culture considerably”[107] and “trigger deep, long-term changes from highly formal rule-focused decision-making in contract law towards a more discretionary principle based- judicial reasoning.”[108] Michael Bridge also highlighted the possible links between morality and good faith and the impact this might have in Canadian and US contract laws.[109]

Back in Australia, however, the submissions made in relation to the 2012 discussion article on the reform of Australian contract law further illustrate this situation. For instance, Bathurst considers that good faith could be recognised on a case-by-case basis and not through codification.[110] Others consider that the introduction of a general duty may generate uncertainty.[111] Finally, Clarke is even “unpersuaded that a doctrine of good faith should be introduced into Australian law as part of the proposed reforms”.[112]

Article 5 of the 1992 Australian Contract Law Code puts the emphasis on legal intention by stating that “a contract is made only when the parties intend legal obligations to arise”.[113] The 2014 draft code of the Australian Law of Contract also states that the intention to be legally bound is one of the main criteria for a contract to be formed.[114] The emphasis is on this legal intention and while it may be the foundation to discuss cooperation and fairness, good faith is not expressly referred to.

IV. An Organising Principle as a New Incremental Step?

Because there is “some” good faith, would legislation be an incremental step?[115] As we saw, not necessarily so, but on the grounds of bringing uniformity across Australia contract law, it may provide certainty and predictability.

Currently, the application and enforcement of the duty to act in good faith depends either on the type of relation, the type of commercial dealing or on the identity of the party, consumer or business. While recent Australian trends show that parties to long term contracts are more likely to be under a duty to act in good faith, there are still one-off instances that are not necessarily covered by the implementation of the concept. The current strict and topical implementation of the concept unfortunately promotes uncertainty, as parties only fall under a duty to act in good faith if their relationship falls under the typical contracts that have been equipped with such a duty. Parties can still provide in the contract that they submit their relationship to the condition that they act in good faith. Courts can impose a duty to act in good faith through the implication of a term or construction of the contract, but these are topical applications decided on a case-by-case basis. The enactment of codes of conduct promoting good faith is to be welcomed, as it not only brings some certainty in some commercial dealings as to whether the duty of good faith applies to the transaction but also shows that the business community needs further regulation on the doctrine of good faith and on fair dealing more generally.

There is, however, a need for a coherent, embracing approach that would bring certainty to all contractual dealings. This was echoed by Justice Einstein who stated that it might indeed be “a virtue of the implied duty [of good faith] that it expresses in a generalisation of universal application, the standard of conduct to which all contracting parties are to be expected to adhere throughout the lives of their contracts.” [116] The author of this article argues that good faith cannot be restricted to a set of rigid rules but is instead of framework, a “general principle” which might be recognised in contract law. The current topical application of good faith to certain contractual relations creates two-tier reasoning: certain commercial contracts on one tier and general contracts on the other. This creates more confusion and, indeed, uncertainty. This shows that the difference between what contract laws dictate that the law should regulate and what practice shows is the gap left between law and the real deal.[117] This is where a general principle of good faith could provide grounds for a remedy. Without such a uniform approach in contracts, contract law becomes more confusing and the concepts more legalistic and disconnected from the business community. Good faith is a chameleon concept that “can only gain substance from the particular events that take place and to which it is applied”.[118] The author of this article agrees with Judge of Appeal Priestley who stated that “anything less is contrary to prevailing community expectations”.[119]

V. Could or Should We Have an Organising Principle of Good Faith?

A. A Critical Analysis

Codes of conduct allow for a doctrine to be broadly applied to certain industry contracts. This is the case for building standards. Over time, building contracts have included a duty to act in good faith or even in utmost good faith. Revising building contract standards and integrating a duty for the parties to act in good faith further builds on what businesses detail in the contract in practice. Broadening the application of the duty to the whole industry in question ensures certainty and foreseeability in the obligations of the parties to the contract. Furthermore, the Franchising Code of Conduct proves that even though costs may be greater in setting up such mandatory legal instruments, the benefits could lead to less legal action before the courts and more recourse to alternative dispute resolution mechanisms. For instance, the Australian Franchising Code of Conduct led to fewer court disputes and more recourse to mediation.[120] Reducing the number of cases before the courts and increasing the recourse to alternative dispute resolution is to be encouraged. The initiative to create small business commissioner offices further shows that such recourse allows for disputes to be settled at a lower cost. Claims are less likely to escalate, and contractual relationships are more likely to be salvaged hereafter, ensuring contractual security. Industry-specific legal instruments such as codes of conduct and standards can help answer industry-specific questions and legal issues. They take into account the context and special characteristics of the relationship and its implicit dimensions.[121] Self-regulation fills a “regulatory vacuum”[122] but is not a way for governments to avoid their regulatory duties.[123] A code can be an exercise of stocktake, gap-filling or a reform.[124] Stocktake and gap-filling are more likely to succeed.[125] Ultimately, there can be no single complete code regulating all aspects of life.[126] Codes must be based on a utilitarian approach and achieve a particular purpose.[127] The Franchising Code of Conduct’s purpose is to “regulate the conduct of participants in franchising towards other participants in franchising".[128] The Food and Grocery Code of Conduct is meant to “help to regulate standards of business conduct in the grocery supply chain and to build and sustain trust and cooperation throughout that chain, but also ensure transparency, provide an effective, fair and equitable dispute resolution process and ultimately promote good faith.”[129] For a code to succeed, it must have two basic characteristics: it must be the only authoritative statement of law, and its propositions must be both sufficiently specific to serve as a point of” point of certainty and sufficiently general to be enduring.[130] Regulation from industry institutions aims to harmonise the way contracts are written and performed in certain industries. It is used to promote certain standards.

These codes of conduct have forced the development of an interpretation of fairness in contractual dealings. The duty that requires parties to act in good faith has been made mandatory in certain commercial contracts through codes of conduct. Codes of conduct are being developed and reflect the practice and use of good faith in certain commercial contracts. The recognition of the duty is gaining momentum. Courts have a role to play in the enforcement and monitoring of such provisions. More importantly, the development of these provisions has pushed a bottom-up approach, whereby good faith is slowly being recognised in law.

Mostly, these codes of conduct deal with relational and long-term contracts. Yet this is proving encouraging for recognition of the doctrine at the more general level of contract law. There is, however, a danger to self-regulation, since industry codes of conduct are not subject to public scrutiny in the same way as statutes. “Self-regulation based on voluntary standards of conduct, it might be argued, is not simply bound to be ineffective, it is also profoundly deceptive”.[131]

To address this pitfall, some codes of conduct have integrated monitoring mechanisms. For instance, the Australian Food and Grocery Code of Conduct is to be reviewed after three years to address whether the Code should be mandatory.[132] This reflects the fine line created by and limits of codes of conduct. Codes of conduct are not in competition on the regulatory field. Instead, they are a call from the community, a model of what the law should integrate.[133] Encouraging codes of conduct is encouraging a regulatory “patchwork” and is calling for a broader approach.[134] Others have argued that “[a] more satisfactory alternative is to address specific sector problems by specific legislative solutions”.[135]

Could it be an optional or voluntary concept? If a principle of good faith in Australian contract law is to be enacted, it is important to ensure parties cannot exclude it from their contract agreement. It can part of the essence of the contractual relationship.[136] But could we have an optional law? The optional law approach has been criticised.[137] The lack of popularity in the EU of instruments such as the Principles on European Contract Law and in Australia of the Unidroit Principles on International Commercial Contracts[138] and the Convention on the International Sale of Goods shows that optional laws are unlikely lead to reform and change in practice. A review of EU law also shows the weaknesses of voluntary or optional regulations. Parties are less likely to integrate them into their contracts and instead are more likely to maintain the national divide by making one state law applicable to the contract.

Current developments in Australia are illustrations of a trend according to which “bottom up”, privatised rule making has become the rule rather than the exception.[139] Thus, these codes of conduct are the first step, but there are many more steps to come. In Australia, the introduction of a good faith duty in self-regulation demonstrates that at least some industries and businesses want such a concept. It testifies to the bottom-up approach, whereby Australian businesses are pushing for the recognition of a doctrine that is yet to be explicitly endorsed in Australian contract law more broadly, either through legislation or judicial decisions.

So what is the role of the court? Case law is traditionally presented as one of the main source of law in common law jurisdictions, like Australia. Judicial decisions are a type of instrument that has been used to recognise certain contractual doctrines. Estoppel and unconscionability are prime examples of their norm-making ability. However, in the context of the introduction of a principle to act in good faith, such an ability may be better if restricted to the interpretation and enforcement of the duty to act in good faith. Three main reasons can be advanced. Firstly, courts are only required to deal with the issue once the dispute has occurred and a remedy must be provided. Only once a precedent has been set can the judicial decision act as a deterrent for bad behaviour. Secondly, disputes before the courts can be lengthy. Thirdly, and more especially in the case of good faith, the courts have yet to form a consensus on the application of good faith. This is valid for both Australia, where the cases show the lack of judicial recognition of good faith on a general basis, and the EU, where the lack of guidance from the European Court of Justice has led to the coexistence of different national interpretations.

A codified integration of a doctrine has a preventative effect, in that it warns the parties beforehand. Even though codification and conventions are said to “age from the moment the draftsman lays down his pen and often become buried under layers of case law and scholarly exegeses,”[140] it is possible to see situations where the statutes and court interpretations have formed a beneficial partnership, where new situations are embraced under enacted doctrines. Again, the doctrine of unconscionability demonstrates this. Originally discussed by the common law, it is now part of the Australian Consumer Law. Yet any effort to codify contract law more holistically seems extremely unlikely, even though recognizing a “principle” can be equivalent to a commitment of the lawmaker (be it a judge or a legislator) to the social norms that that principle restates or reformulates.[141] Should good faith be codified in some general framework to regulate contract law, its chameleon characteristic leaves the judge in charge of determining whether a particular conduct is indeed contravening the provision on good faith. It is best left to the courts to determine the circumstances of a particular case. However, the contract remains the most important document between the parties. Therefore, a general principle of good faith should not be seen or used by the judge as an opportunity to rewrite the contract and step beyond his or her capacity. This is however, a dilemma that courts have encountered when interpreting some contractual provisions or determining whether a particular person has acted as a reasonable person would.[142]

There is a clear need for institutions to provide a relevant point of contact between businesses and regulators. The role of the Australian Competition & Consumer Commission (ACCC) is to “make markets work for consumers … increase the prosperity and welfare of Australian consumers … [and] support fair trading”.[143] The Australian Securities and Investments Commission’s role is “to maintain, facilitate and improve the performance of the financial system and entities in it [and to] promote confident and informed participation by investors and consumers in the financial system”.[144] Overall, a regulatory agency "needs to be both procedurally and substantively just at the same time that it is accommodating and flexible, yet also capable, and publicly known to be capable, of tough and effective enforcement action when a breach occurs".[145] They are also the ones that ensure that the sale of goods, services and financial services are done not in a unconscionable matter and are performed in good faith. However, while the ACCC has been acting by investigating and acting in certain situations, the 2018 Royal Commission on bank practices has shown the limited powers of enforcement of ASIC.

Australia is at a crossroads. It can follow the path of Canada and many more countries outside the Commonwealth that are recognising good faith.[146] It is well beyond the scope of this article to examine what framework could be put in place in Australia, but it is important to highlight the benefit of a federal approach. The Council of Australian Governments (COAG)—made up of the Prime Minister, the state and territory premiers and Chief Ministers and the President of the Australian Local Government Association[147]—has planned regulatory reforms to create a seamless national economy by ending unnecessary differences between laws covering the same areas of activity in different states, as demonstrated by the ACL.[148] Yet a more coherent and uniform approach is to be considered to ensure that trade within the states and territories of Australia is not hindered. Bruno Zeller proposes to amend the Sales of Goods Act and to incorporate parts of the CISG in domestic law.[149] The proposition of regulating general contract law at the state and territory level through the harmonisation of certain types of contracts is already happening through codes of conduct.[150] Not only is there no reason for state and territory parliaments to double up on the provisions, but these codes of conduct already promote harmonised trade rules across Australian states and territories. Another proposition would be to supplement current developments with the draft of a "general contract law that could express all the basic rules of contract presently governed by the common law".[151] If good faith is presented as a general principle of contract law, its inclusion in such a framework seems appropriate. The question as to what framework will be articulated to adapt the already present statutory landscape to the recognition of good faith in Australian contract law is the next question to be answered. It may be the most arduous one.

VI. Conclusion

Good faith may provide a unifying concept for a number of distinct rules dealt under different headings and contribute to a greater consistence in the law by exerting pressure upon rules which are incompatible with the idea of good faith.[152]

The question of the integration of the doctrine of good faith in Australian contract law through implied terms is an arduous one. The absence of a clear stance and, in fact, the presence of conflicting opinions on the notion of good faith and its place in Australian contract law have led to calls for reform of the discipline to ensure fairness and justice. These discussions follow a certain cyclical pattern. In 1992, discussion arose from the decision by the New South Wales Court of Appeal, the infamous Renard case, leading to the recognition that parties should exercise discretionary rights in a reasonable manner and according to good faith. In 2002, the High Court pushed aside the possible discussion on the recognition of good faith in contract law in Australia. In 2012, a discussion article issued by the Australian Attorney General discussed the possible recognition of the notion, although the project did not get traction. Meanwhile, good faith has been recognised in some specific contracts through statutes. Indeed, the Franchising Code of Conduct, the Horticulture Code of Conduct, the Food and Grocery Code of Conduct and the new standard contract in the building and construction industry have all been updated to include a duty to act in good faith. Meanwhile, state legislation and some more recent judicial decisions have imposed a duty to perform in good faith. Yet even where courts find a duty of good faith, they rarely find it has been breached. Basing contract law on principles and fighting fragmentation have been advanced as a motto of the reform of international commercial law in Australia.[153] The issue is, however, not confined to Australian businesses dealing overseas. A reform of contract law would have to include domestic reform to ensure that cross-border trade between states and territories is also facilitated.

Good faith is a principle of the general law of contract that has been prescribed across these markets and has reached the community. The Australian development of self-regulation shows the desire of the community for clarification on good faith. Although these initiatives must be applauded, it is important to consider a federal statutory approach to avoid the fragmentation of contract law in special provisions, which could result in inefficiency, with similar rules and interpretations being developed simultaneously in different industries. It is not in the interest of the community to increase the load of regulations that repeat the same concept. It may well be that it is for the federal parliament, and not the courts as in Canada, to recognise good faith as “… a principle that provides integrity to the contractual bargain, recognising at the same time that contracts are a social institution that are subject to overriding obligations to the public good in certain circumstances”.[154]

This article has examined the complex contexts in which good faith applies to certain Australian contracts as well as the multitude of actors involved with its development, application and enforcement. This complexity reflects the notion of good faith itself. The concept is multi-contextual: it can adapt to different situations while not losing its core values. In the words of Friedman, it “provide[s] a unifying concept for a number of distinct rules dealt under different headings and contribute[s] to a greater consistence in the law by exerting pressure upon rules which are incompatible with the idea of good faith”.[155] An organising principle of contract law—now that is a nice proposition. But is it the right one for Australia?

  1. Bhasin v Hrynew 2014 SCC 71, [2014] 3 SCR 494 [58].

  2. Bhasin (n 1) [65].

  3. Bhasin (n 1) [93].

  4. Bhasin (n 1) [23].

  5. Bhasin (n 1) [63-67].

  6. BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] UKPC 13; Codelfa Construction Pty Ltd v State Rail

    Authority of NSW [1982] HCA 24; Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286.

  7. Renard Constructions (ME) Pty ltd v Minister for Public Works (1992) 26 NSWLR 234, 261-263 (Priestley J).

  8. John W Carter, Elisabeth Peden, “Good Faith in Australian Contract Law” (2003) 19 JCL 155; Suzanne, Corcoran, “Good Faith as a Principle of Interpretation: What Is the Positive Content of Good Faith?” (2012) 36 Australian Bar Rev 1.

  9. Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15.

  10. Consumer and Competition Act 2010 (Cth) Sched 2; Australian Competition and Consumer Commission v Valve Corporation (No 3) [ 2016] FCA 196.

  11. Mackay v Dick (1881) 6 App Cas 251, 263.

  12. (1896) 7 QLJ 68, 70-1.

  13. Jeannie Patterson, Andrew Robertson and Duke Arlen, Principles of Contract Law (4th ed, 2011) 346.

  14. (1979) 144 CLR 596, 607.

  15. Ibid 608.

  16. Council of City of Sydney v Goldspar [2006] FCA 472 [166].

  17. Council of City of Sydney [2006] FCA 472 [185].

  18. Ibid [162].

  19. Consumer and Competition Act 2010 (Cth) Sched 2, secs 23-27.

  20. (n 7).

  21. See the scholarship in Hugh Collins, “Discretionary Powers in Contracts” in D Campbell, H Collins, J Wightman (eds), Implicit Dimensions of Contract Discrete, Relational, and Network Contracts (Hart 2003) 219, 245.

  22. Renard (n 7) 265.

  23. Renard (n 7).

  24. See William M. Dixon, “Good faith in contractual performance and enforcement: Australian doctrinal hurdles” (2011) 39 Australian Bus L Rev 227.

  25. Far Horizons Pty Ltd v McDonalds [2000] VSC 310 [119].

  26. Anthony Mason, “Contract, Good Faith and Equitable Standards in Fair Dealing” (2000) 116 LQR 66, 69.

  27. [1998] 44 NSWLR 349.

  28. Ibid 369.

  29. Ibid.

  30. [2012] NSWCA 184, [145] (Bathurst CJ); In line with Mason (n 26).

  31. [1999] FCA 903.

  32. Ibid [ 35] (Filkenstein J).

  33. Ibid [38].

  34. Ibid [39].

  35. Ibid [46].

  36. [2000] VSC 310.

  37. Burger King Corp v Hungary Jacks Pty Ltd (2001) NSWCA 187.

  38. Ibid [165].

  39. Ibid [168].

  40. Ibid [189].

  41. Ibid [639].

  42. Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289.

  43. Renard (n 7); Royal Botanic Gardens(n 42).

  44. See for instance the argument made in Corcoran (n 8).

  45. (n 42).

  46. Ibid 290.

  47. Dixon, “Doctrinal Hurdles” (n 24); Bill Dixon, “What is the content of the common law obligation of good faith in commercial franchises?” (2005) 33 Australian Bus L Rev 207; Howard Munro, “The good faith controversy in Australian commercial law: a survey of the spectrum of academic legal opnion” (2009) 28 Queensland L J 167.

  48. Anthony Gray, “Good faith in Australian contract law after Barker” (2015) 43 Australian Bus L Rev 358, 378.

  49. Commonwealth Bank of Australia v Barker [2014] HCA 32 [42], [107].

  50. Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41, 63.

  51. Goldspar (n 16).

  52. Bhasin (n 1)[48].

  53. Dixon, “Doctrinal Hurdles” (n 24).

  54. See for instance Alstom Ltd v Yokogawa Australia Pty Ltd & Anor (No 7) [2012] SASC 49*.*

  55. Building contract standard DRAS11000:2015.

  56. See for instance the discussion above on Garry Rogers Motors (n 31).

  57. Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL & Ors [2005] VSCA 228.

  58. See for instance, Ermanno Calzolaio, « Le rôle de la jurisprudence dans la comparison civil law-common law » (2014) 42 Petites Affiches 7.

  59. Andrew Stewart, “What’s Wrong with the Australian Law of Contract?” (2012) 29 JCL 74, 78.

  60. As per Paul Finn as related in Bryan T. Horrigan, "New Directions in How Legislators, Courts, and Legal Practitioners Approach Unconscionable Conduct and Good Faith’ (2012) Supreme Court History Program Yearbook 2012 (2013) 171, 171; Monash University Faculty of Law Legal Studies Research Paper No. 2013/38. Available at SSRN: http://ssrn.com/abstract=2378617 as available on 13 November 2018.

  61. Bryan T. Horrigan, “New Directions in How Legislators, Courts, and Legal Practitioners Approach Unconscionable Conduct and Good Faith” (2012) Supreme Court History Program Yearbook 2012 (2013) 171, 171; Monash University Faculty of Law Legal Studies Research Paper No. 2013/38. <http://ssrn.com/abstract=2378617> accessed 13 November 2018.

  62. The Franchising Code, Horticulture Code, the Oil Code, the Wheat Port Code and the Unit Pricing Code.

  63. Competition and Consumer (Industry Codes—Franchising) Regulation 2014 (Cth) sec 6(3).

  64. Ibid.

  65. Dixon, “Content” (n 47) 222.

  66. (1999) 21 ATPR 41-703.

  67. (n 37).

  68. There is here a clear link with reasonableness seem under implied duty of reasonableness in exercises of contractual powers in case law.

  69. McDonalds (n 25).

  70. Small Business Development Corporation (WA) Inquiry into the Operation of Franchise Businesses in Western Australia Report to the Western Australian Minister for Small Business (2008); also found in Automasters Australia Pty Ltd v Bruness Pty Ltd (2003) [2002] WASC 286 [372].

  71. See recommendation [8.60], Parliamentary Joint Committee on Corporations and Financial Services, Opportunity not opportunism: improving conduct in Australian franchising (December 2008) 101.

  72. Ibid.

  73. See Tony Piccolo MP, Economics and Finance Committee, Parliament of South Australia, Proof Committee Hansard, Melbourne (5 November 2008) 58.

  74. See Commonwealth Government Response to the report of the Parliamentary Joint Committee on Corporations and Financial Services Opportunity not opportunism: improving conduct in Australian franchising (2009) 13. See also Andrew Terry and Cary Di Lernia, “Franchising and the Quest for the Holy Grail: Good Faith or Good Intentions” (2009) 33 Melbourne L Rev 542.

  75. Trade Practices (Industry Codes—Franchising) Regulations 1998 (Cth) cl 23A.

  76. See Alan Wein, Review of the Franchising Code of Conduct (30 April 2013) 63.

  77. Industry Codes—Franchising (n 63) art 6(1).

  78. Ibid art 6(3).

  79. See Australian Competition & Consumer Commission, “Acting in Good Faith”, <http://www.accc.gov.au/business/franchising/acting-in-good-faith> accessed 30 May 2019; see also Industry Codes—Franchising (n 63) sec 6(6)

  80. Ibid art 6(4).

  81. SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50.

  82. Competition and Consumer (Industry Codes—Horticulture) Regulations 2017 (Cth) S 8(3).

  83. Competition and Consumer (Industry Codes—Food and Grocery) Regulation 2015 (Cth) sec 2*.*

  84. Ibid sec 28(3).

  85. Ibid sec 28.

  86. Ibid sec 28(3); for a review on its success, see Caron Beaton-Wells and Jo Paul-Taylor, “A Code of Conduct for Supermarket-Supplier Relations: Has it Worked?” (2018) 46 Australian Bus L Rev 6.

  87. Ibid 22-23.

  88. Building standard: AS11000:2015, cl 2.1; Alexander Di Stefano, “Good Faith in the AS11000: Has the Eagle Landed?” (2016) 33 Building and Construction L J 13.

  89. Di Stefano (n 88) 17.

  90. Steve Howard, Executive general manager of business development, RACV, in Office of Victorian small business commissioner, Forming and maintaining winning business relationships (2007) 13.

  91. Victorian Small Business Commission, Annual report (2003/4) 4.

  92. Victorian Small Business Commission, Annual report (2004-5) 6-7: Small Business Commissioner Act 2003 (Vic).

  93. Victorian Small Business Commission, Annual report (2012/2013)10: “The number of general commercial disputes lodged under the Small Business Commissioner Act 2003 (SBC Act) increased by 14.9 per cent. However, the total number of these matters is still below the 2010-11 levels”.

  94. Small Business Commissioner Act 2003 (Vic) sec 5(2).

  95. Victorian Small Business Commission, Annual report (2012/2013) 10: “Franchising disputes come before the VSBC as alleged “unfair market practices” under the Small Business Commissioner Act 2003”; see also Victorian Small Business Commission, Annual report (2006/2010) 9.l.

  96. Victorian Small Business Commission, Annual report (2005/206) 2: “The capacity to investigate unfair market practices does much to redress imbalance in small and big business relationships. In 2005-06, 45 investigations were referred to the VSBC. Many of the investigations are ongoing, and are not easily resolved. However, with perseverance a reasonable outcome can be achieved for the complainant”.

  97. The NSW Office of the Small Business Commissioner was established in mid-2011. http://www.startupsmart.com.au/ken-phillips-/nsw-lends-muscle-to-soloists.html; Small Business Development Corporation Act 1983 s 14A.

  98. https://hansard.parliament.sa.gov.au/pages/loaddoc.aspx?s=99664- House of Assembly – (Wednesday, 14 September 2011) 4949.

  99. Bill introduced and read a first time and ordered to be printed on motion by the Hon. Adam Searle, Second Reading 14302, 14310. He went on to say that “it provides the government of the day with another tool for making the appropriate arrangements for industry”. <https://www.parliament.nsw.gov.au/Prod/Parlment/nswbills.nsf/131a07fa4b8a041cca256e610012de17/31bf4050b0fff87eca257a07000864a1/$FILE/Small Business Commissioner - LC 2nd Read.pdf>

  100. Bhasin (n 1) [59].

  101. Australian Government, Attorney General’s Department, Improving Australia’s Law And Justice Framework: A Discussion Paper To Explore The Scope For Reforming Australian Contract Law (2012) 8.

  102. A full list of the questions and infolets can be found at

    <http://www.ag.gov.au/Consultations/Pages/ReviewofAustraliancontractlaw.aspx> (2 July 2012).

  103. Jack Beatson and David Friedmann (eds), Good Faith and Fault in Contract Law (Clarendon Press 1995); Christopher JF Boge, “Does the Trade Practices Act Impose A Duty To Negotiate In Good Faith? PART 1”, (1998) 6 Trade Practice LJ 4; Christopher JF Boge, “Does the Trade Practices Act Impose A Duty To Negotiate In Good Faith? PART 2”, (1998) 6 Trade Practice LJ 68; Roger Brownsword, “Two Concepts Of Good Faith” (1994) 7 JCL 197; John W. Carter, “Good Faith in Contract: Why Australian Law is Incoherent” (Legal Studies Research Paper No 14/38, Sydney Law School, 2014); John W Carter and Michael P Furmston, “Good Faith and Fairness in the Negotiation of Contracts PART I” (1994) 8 JCL 1; John W Carter and Michael P Furmston, “Good Faith and Fairness in the Negotiation of Contracts PART II” (1994) 8 JCL 1; John W Carter and Elisabeth Peden, “Good Faith in Australian Contract Law” (2003) 19 JCL 155; Dixon, “Doctrinal Hurdles” (n 24); Dixon, “Content” (n 47); James Douglas, “Exploring the Recent Uncertainty Surrounding the Implied Duty of Good Faith in Australian Contract Law: the Duty to Act Reasonably - Its Existence, Ambit and Operation” (LexisNexis Contract Law Master Class, 24 August 2006) <http://cisgw3.law.pace.edu/cisg/biblio/douglas1.html> accessed 30 May 2019; Paul Finn, “Fiduciary and good faith obligations under long term contracts” in Kanaga Dharmananda and Leon Firios (eds), Long Term Contracts (Federation Press 2013) 136; JT Gleeson, JA Watson, Elisabeth Peden, Historical Foundations of Australian Law vol 2 (Federation Press 2013); Anthony Mason (n 26); Jeannie Marie Paterson, “The Contract to Negotiate in Good Faith: Recognition and Enforcement” (1996) 10 JCL 120; Elisabeth Peden, “When Common Law Trumps Equity: the Rise of Good Faith and Reasonableness and the Demise of Unconscionability” (2005) 21 JCL 226; Elisabeth Peden, “Incorporating Terms of Good Faith in Contract Law in Australia” (2001) 23 Sydney L Rev 233; Lisa Spagnolo, “Opening Pandora’s box: good faith and precontractual liability in the CISG” (2007) 21 Temple Int’l & Comp LJ 261; Lisa Spagnolo, “Law Wars: Australian Contract Law Reform vs. CISG vs CESL” (2013) 58 Villanova L Rev 623; Jane Stapleton, “Good faith in private law” (1999) 52 Curr Leg Probl 1; Stewart (n 59); Bruno Zeller, “Good Faith - Is it a Contractual Obligation?” (2003) 15 Bond L Rev 215.

  104. (1991) 24 NSWLR 1, 41-42

  105. (1993) 45 FCR 84, 96.

  106. Roger Brownsword, Norma J. Hird and Geraint Howells, Good Faith in Contract: Concept and Context (Ashgate 1999) 3.

  107. Gunter Teubner, “Legal Irritants: Good Faith in British Law or How Unifying Law Ends up in New Divergences” (1998) 61 MLR 11, 20.

  108. Ibid 21.

  109. Michael Bridge, “Does Anglo-Canadian Contract Law need a doctrine of good faith?” (1984) 9 Can Bu LJ 385, 391.

  110. Tom Bathurst, Submission No 55, to Attorney General’s Department, Improving Australia’s Law And Justice Framework: A Discussion Paper To Explore The Scope For Reforming Australian Contract Law (20 July 2012), 14.

  111. University of Sydney, Submission No 31 to Attorney General’s Department, Improving Australia’s Law And Justice Framework: A Discussion Paper To Explore The Scope For Reforming Australian Contract Law, (20 July 2012) 2.

  112. Submission No 40 to Attorney General’s Department, Improving Australia’s Law And Justice Framework: A Discussion Paper To Explore The Scope For Reforming Australian Contract Law, (20 July 2012) 2.

  113. Fred Ellinghaus and Ted Wright, An Australian Contract Code (Discussion Paper No 27, 1992) art 5.

  114. T Wright, F Ellinghaus, D Kelly, “A Draft Australian Law of Contract” (Working Paper No 13-03-14, Newcastle Law School, 2014) s 13 < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2403603> accessed 30 May 2019.

  115. Bhasin (n 1) [29].

  116. Aiton Australia Pty Ltd v Transfield Pty Ltd (1999) 153 FLR 236, 258.

  117. Stewart Macaulay, “Relational Contracts Floating on a Sea of Custom - Thoughts about the Ideas of Ian MacNeil and Lisa Bernstein”, (1999) 94 Northwestern L Rev 775.

  118. Shalev, “Negotiating in good faith” in S Goldstein (ed), Equity and Contemporary Legal Developments (Hebrew Univ Jerusalem 1992) 818, 820.

  119. Renard (n 7) 268.

  120. Jolene Lim, Lorelle Frazer, “Introducing Franchising Regulation” (2002) 10(2) J Marketing Channels 39,55.

  121. Campbell, Collins, and Wightman (n 21).

  122. Wesley Cragg, “Ethics codes: the regulatory norms of a globalised society?” in A Soeteman (ed), Pluralism and Law (Springer 2001) 191, 195.

  123. Ibid..

  124. Stewart (n 59) 88-89.

  125. Dan Svantesson “Codifying Australia’s Contract Law—Time for a Stocktake in the Common Law Factory” (2008) 20 Bond L Rev 92 ,113.

  126. Donald Robertson, “The International Harmonisation of Australian Contract Law” (2012) 29 JCL 1, 24.

  127. Geoff Lindsay Submission No 4, to Attorney General’s Department, Improving Australia’s Law And Justice Framework: A Discussion Paper To Explore The Scope For Reforming Australian Contract Law, (20 July 2012).

  128. Industry Codes—Franchising (n 63) sec 2.

  129. Industry Codes—Food and Grocery (n 83) sec 2*.*

  130. MP Ellinghaus and EW Wright, An Australian Contract Code (1992) 4 <https://ogma.newcastle.edu.au/vital/access/manager/Repository/uon:4142?view=null&f0=sm_relation%3A"http%3A%2F%2Fwww.lawreform.vic.gov.au"&sort=null> accessed 30 May 2019; Ejan Mackaay, “Good Faith in Civil Law Systems – A Legal-Economic Analysis” (December 3, 2011). <https://papyrus.bib.umontreal.ca/xmlui/bitstream/handle/1866/18314/Mackaay-CIRANO-Good-faith-civil-law-systems-2011.pdf?sequence=1&isAllowed=y> accessed 30 May 2019.

  131. Cragg (n 122) 195.

  132. Industry Codes—Food and Grocery (n 83) sec 5*.*

  133. For a view on this, see Hélène Boucard, « Les instruments internationaux: concurrence ou model pour les droits nationaux » in G Wicker, C Aubert de Vincelles, H Boucard, D Ferrier, Droit européen du contrat et droits du contrat en Europe - Quelles perspectives pour quel équilibre ? (Litec 2007) 21.

  134. Stewart (n 59) 77.

  135. Terry & Di Lernia (n 74) 575.

  136. Unidroit, Principles on International Commercial Contracts (2016) art 1.6.

  137. Stewart (n 59) 89.

  138. Unidroit (n 136).

  139. Klaus Peter Berger, “The Role of the UNIDROIT Principles of International Commercial Contracts in International Contract Practice: The UNIDROIT Model Clauses” (2014) 19 Unif L Rev 519, 520. For the concept of “bottom-up” law-making, see Janet K Levit, “A Bottom-Up Approach to International Lawmaking: The Tale of Three Trade Finance Instruments” (2005) 30 Yale J Int’l L 125; Janet K Levit, “Bottom-up Lawmaking through a Pluralist Lens: The ICC Banking Commission and the Transnational Regulation of Letters of Credit” (2008) 57 Emory LJ 1147.

  140. Schwenzer, Ingeborg (ed), Schlechtriem & Schwenzer: Commentary on the UN Convention on the International Sale of Goods (3rd edn, OUP 2010) 9.

  141. Yehuda Adar and Pietro Sirena, “Principles and Rules in the Emerging European Contract Law: From the PECL to the CESL, and Beyond” (2013) 9 ERCL 1, 21.

  142. This is echoed in Robert McDougall, “The Interpretation of Commercial Contracts – Hunting for the Intention of the Parties” (College of Law Specialist Legal Conference, 18 May 2018) <http://www.supremecourt.justice.nsw.gov.au/Documents/Publications/Speeches/2018 Speeches/McDougall_20180518.pdf> accessed 12 November 2018.

  143. See Australian Competition and Consumer Commission, “About Us” <https://www.accc.gov.au/about-us/australian-competition-consumer-commission/about-the-accc> accessed 30 May 2019.

  144. See Australian Securities and Investments Commission, “About Our Role” <http://asic.gov.au/about-asic/what-we-do/our-role/> accessed 30 May 2019.

  145. Vibeke Lehmann Nielsen, Christine Parker, “What do Australian businesses really think of the ACCC, and does it matter?” (2007) 35 Fed L Rev 187, 197.

  146. Rodrigo Momberg and Stefan Vogenauer, “The Principles of Latin American Contract Law: text, translation, and introduction” (2018) 23 Unif L Rev 1, 6.

  147. The role of COAG is to promote policy reforms that are of national significance, or which need co-ordinated action by all Australian governments. Council of Australian Governments, “About COAG” <https://www.coag.gov.au/about_coag> accessed May 30, 2019.

  148. Ibid..

  149. More especially United Nations Convention on the International Sale of Goods(CISG) arts 8 and 9; see Bruno Zeller, “The CISG and the common law: the Australian experience,” Submission No 02 ( Part 2) to Attorney General’s Department, Improving Australia’s Law And Justice Framework: A Discussion Paper To Explore The Scope For Reforming Australian Contract Law (20 July 2012).

  150. Stewart (n 59) 88.

  151. Ibid.

  152. Beatson (n 103) 399.

  153. Donald Robertson, “The International Harmonisation of Australian Contract Law” (2012) 29 JCL 1, 22.

  154. Ibid 21.

  155. Daniel Friedmann, “Good Faith and Remedies for Breach of Contract” in Beatson (n 103) 399.