International Commercial Contract
International agreements and contracts are frequently designed in a comparatively standardised style, utilising pretended boilerplate clauses. Their major objective stands for regulation of contractual operations and interpretations. Moreover, international contracts frequently include an arbitration clause, which conforms to all disputations to arbitrage. It is practically eliminating any participation of national courts appearing from the contracts. Standardising contract utterances, while incorporating a boilerplate legal framework, are the constituents, which demonstrate intent to interpret the contract self-sufficiently. The incorporation of comprehensive and large-scale regulations of the juridical connection between the parties makes the national law inessential. Thus, when it appears as irrelevant, while the contract is a mere foundation for regulating the parties’ juridical intercourse, standardising of contract terms becomes crucial and meaningful. It occurs even if the contract is supposed to be executed in a variety of legal systems. The current paper will analyse and review the principle of good faith and demonstrate what represents an impediment to the idea of lawless contracts, particularly if being applied to interpret boilerplate clauses.
What Represents an Impediment to the Idea of Lawless Contracts
The facts reveal that English law does not presently acknowledge a comprehensive and commonly implied obligation regarding contracting sides to execute their responsibilities and duties in good faith. This situation is highly different from the attitude of numerous other states, incorporating the US, France, Australia, Germany, etc. They acknowledge some type of predominant concept regarding the fact that parties are supposed to act in a good faith while signing and executing contracts. Several latest cases have ignited the debate regarding the possibility of English law to assume an analogous obligation. There are some reasons why this situation will not happen in the nearest future and why this obligation is necessary. Firstly, it is needed due to the fact that parties pursue entering into long-range relational agreements. They depend on constant intercourse and cooperation in order to perform efficiently. Secondly, the increasing utilization of good faith expressing the obligation in English law agreements appears to enlist additional legitimate interpretations.
On the other hand, the facts demonstrate that English law seems to be resistant to acknowledge a universally implied obligation of good faith other than for the particular types of agreements, including the fiduciary and employment intercourse. It partially appears due to the concerns that it might cause or initiate an elevated level of unreliability. The reason is that conclusions regarding the original duty requirements might be unclear and subjective. Moreover, it goes in defiance of the contract freedom. Therefore, instead of imposing extensive principles of good faith in agreements, English law has developed by evolving specific resolutions. It has been a reaction to peculiar issues, incorporating those situations, which might appear as unfair. Numerous commercial agreements particularly extort a party to execute specific duties or perform determined discretions operating in good faith. In addition, despite the fact that it is less common, there is also a possibility to oblige an expressed obligation in order to execute the entire agreement in good faith. Therefore, all displayed terms will be rendered meticulously, taking into account the whole context of the entire contract together with the commercial intercourse between the sides. The English law does not provide any generally applicative definition of good faith for the contracts performing. Therefore, its substance of obligation seriously depends on the context. It typically presents the core meaning of honesty, which actually requires the further elaboration. There are numerous samples of discrepant interpretations by the courts, including the loyalty to a concerted general objective; operating within the spirit of the contract; and performing consistently with fair dealing and legitimate perspectives of the parties. Nevertheless, despite the fact that good faith incorporates a fundamental meaning of honesty, not all bad faith incorporates dishonesty. Generally speaking, bad faith behaviour typically presupposes the conduct. It is believed to be commercially intolerable, inappropriate or unethical, which does not stand for being practically dishonest. Therefore, an inability to operate in good faith does not automatically presuppose fraud committing or other type of dishonesty.
The contrast of the English law with the majority of civil law jurisdictions acknowledges that the latest ones recognize some types of obligations regarding contracting parties to execute their duties. It occurs despite the fact that the practical duty typically differs between countries. Thus, the German Civil Code presupposes that contracting sides are supposed to perceive good faith in both negotiations and execution of the contract. It appears to be a major principle of German civil law demanding an intercourse, grounded on trust during the commercial dealing of sides in a specific transaction and not merely reasonable acting. In addition, the French Civil Code incorporates a necessity that contracts should be performed in good faith as well. Moreover, even regarding the international matters, there is no such concept as lawless contracts in regards with the French law. Nevertheless, it is completely allowable in international arbitrages to equip that the arbitral courts are supposed to operate in affable composition. It does not ask the court to utilise a law excepting for principal regulations of the due process combined with the international public policy. Nevertheless, the principle of contractual freedom virtue presupposes that an agreement controlled by French law might concern other standards and regimes as well. On the other hand, the case of the United States demonstrates that each agreement or obligation falling under the Uniform Commercial Code inflicts a duty of good faith in its execution or implementation. It is the case, in which good faith is outlined as actual honesty in the concerned behaviour or undertaking. Nevertheless, despite the fact that the doctrine in the US has statutory definitions, its meaning together with its exact scope is vague.
The main issue concerns the fact whether or not parties should anticipate a general dependence on a good faith principle in a contract. The case of the US demonstrates that its jurisdictions in the form of the Uniform Commercial Code equip the statutory subsistence for a contractual good faith type. Nevertheless, a general Common Law duty of good faith in agreements appears to be highly obscure outside the United States. In fact, the latest English cases are the best example for the following statement. The principle of good faith represents an impediment to the idea of lawless contracts. In March 2013, in the Compass Group UK and Ireland Ltd and Mid Essex Hospital Services NHS Trust, the English Court of Appeal overturned a High Court judgment on appeal. The High Court resolution together with the ultimate requisition verdict regarding Yam Seng Pte Ltd versus International Trade Corp Ltd tried to institute a universal contracting obligation to operate in good faith under the English law. Nevertheless, the Court of Appeal has reaffirmed the long-established doctrine regarding the fact that there is no universal standard of good faith in English contract law. The court restated that this obligation could merely be implied into a restricted amount of contracts, majorly those agreements, which had the fiduciary nature. It practically means that agreement drafters have no capability to depend on a universal implied principle of good faith in regards with contracts. Therefore, all duties to operate in a rational and well-grounded manner and provide appropriate regards to the concerns of the other party (if required) are supposed to be explicitly and meticulously expressed in the contract. Moreover, that are considered to be outlined as accurately and precisely as possible in all applicative occasions and situations.
The analysis of contractual agreements together with the notion of good faith should also incorporate the review of boilerplate clauses. The facts demonstrate that the term boilerplate has been derived from the newspaper field. These ones were the specific metal plates, on which syndicated or finished-to-print copy was provided to newspapers. The main thing regarding them concerns the fact that they could not be changed or adjusted before printing. Therefore, the utilization of this term in legal systems refers to specific clauses in a contract which are not supposed to appear as a subject to any type of possible negotiations. Generally speaking, the commercial transactions presuppose that a boilerplate, which is also known as a standard form appears in the following sense. One side (or maybe both or several ones) extorts this type of clauses. It occurs despite the fact that there is still a room for negotiations in regards with its accurate content. For instance, a market might require some restrictions on its possible responsibility, at the same time being required to discuss its terms of the actual limitation. On the other hand, a purchaser might desire to define the level of damaging overdue for the market’s breach at the same time being required to discuss the terms and conditions regarding the above-mentioned level. The English law of contracts has a long history of employed interpretations. They were supposed to subdue the worst abuses of standard forms or boilerplate clauses. The prime sample is related to the utilization of the principle of contra proferentem in both of its forms. The first one regards the fact that in a case of any doubt wording has to be construed against the side, which actually has proposed it to be incorporated in the contract. It is known to be applicable to boilerplate clauses generally. The second form concerns the fact that ‘wording in a contract is supposed to be construed. It also is related to any common law duty, which arises apart from the contract. It is known to be applicable to exemption clauses. The facts demonstrate that the more imprudent is the outcome the more improbable it is. Therefore, the sides can have planned or designed it. However, if it appears that they intended it, it would be more necessary for them to make their intention opulently clear. Therefore, in case when the sides made their intent fairly comprehensible and understandable, there is no room for the indirect control of unreasonableness via interpretation. Nevertheless, the sides are undoubtedly supposed to control and adjust their concerns and define the sources of their control. Despite the fact that numerous legal systems equip subsidiary duties appearing from the type of the contract, a universal principle of good faith appears as a concept. It helps to prevent an abuse of rights. It presupposes that agreements constantly have to be understood and comprehended, not merely on the basic ground of duties written in the contract, but also in conjugation with the constituents of the applicative law integrating the contract. Therefore, the contract appears before the hazards of having a discrepant scope basing on the governing law. The existence of the Entire Agreement clause helps in avoiding such unreliability and variability by excluding the feasibility of instancing external constituents. Generally speaking, the Entire Agreement clause creates an illusory effect of the noted duties’ exhaustiveness. Firstly, subsidiary duties created by the law operations frequently might not appear as exempted by the contract. In addition, numerous legal systems allow providing the evidence that the contract creates duties. They appear as discrepant from those incorporated in the agreement. Moreover, numerous civilian legal systems clearly let the utilization of pre-agreement material. It helps the terms and conditions noted in the contract. Finally, a solid and strict compliance to the clause wording might, under some setting, be observed as dissatisfying even under English law. It is even regardless the form-type interpretation style, which the mentioned law might execute in respect of other clauses.
Therefore, it appears as obvious that the impact of the clause does not derive from the simple words. However, it can be regarded as the outcome of conjugation of clause and governing law. A number of the most acknowledged transnational sources, specifically the UNIDROIT Principles of International Commercial Contracts (UPICC) together with the Principles of European Contract Law (PECL), are greatly grounded on a universal principle of good faith. Therefore, it appears that this concept, as a legitimate one, requires specifications. Meanwhile there is no universally recognised legal principle of good faith, which appears as relatively accurate in order to be utilised uniformly, regardless of the governing law. In addition, such instrument provides an interpreter with much room for intervention concerning the wording. It is grounded on the fundamental role provided to the principle of good faith. It actually appears as contradictory to the actual intent of standard contracts. Generally speaking, the international agreement practice should be comprehensive and self-sufficient and not impacted by the interpreter’s legal tradition. Therefore, any corrections performed on a basis of such concepts as good faith would appear as counteracting in regards with the expectations from the sides.
The facts reveal that one of the most felicitous implements of contract law harmonisation and adjustment concerns the 1980 Vienna Convention on Contracts for the International Sale of Goods (CISG). The evidence reveals that it is confirmed, approved and ratified by more than 60 countries. It is regarded to be an embodying standard. In accordance with the CISG Article 79, a side is not regarded to be responsible for the inability to execute its duties. It occurs in case when it is able to prove that the non-fulfilment appeared as an impediment beyond its control. It was unexpected and could not have been overcome in a reasonable manner. Generally speaking, the CISG does not incorporate any references to the assiduity of the impacted side in a form of a criterion for withdrawing it from reasonability and accountability. In fact, the Convention claims and approves that assiduity cannot be regarded as a justification. In general, such articles as 45(1) (b) and 61(1)(b) demonstrate that each side might execute contracting methods and avenues in regards with their non-fulfilment against the other party without having to demonstrate and prove any guilt or neglect or shortage of good faith. In addition, these articles do not mention that any evidence of assiduity can discharge the other side from its responsibilities and accountability. On the other hand, the Secretariat Commentary does not demonstrate how the standard of the control sphere should be expounded and rendered. It actually might be rendered literally or as a reference to the meticulous behaviour of the marketer. Taking into account the fact that CISG has to be expounded autonomously, without any domestic legal systems referencing, it appears as relevant to render the Convention literally and observe the above-mentioned Article 79 in an objective manner. It practically helps in dividing the legal landscape into two spheres, including the one of the marketer and the other of the purchaser. It occurs without any references to the particular or practical and genuine probabilities to exercise control.
The current paper vividly demonstrates that the party autonomy is restricted in regards with the international arbitrage. It occurs despite the fact that there is a common and widespread opinion that contracts appear as self-sufficient. This view illustriously suggests that self-sufficiency of contracts combined with arbitration allows creating a closed circuit, leaving the national law out. Generally speaking, the legal framework in regards with arbitration assures that the latter one has an essential level of autonomy. However, it cannot be regarded as unrestricted. The essay demonstrates that international lawless contracts are frequently created in a standardised way. They do not take into consideration the applicative law. In general, it typically creates the illusion that the contract is a mere fundamental ground for the parties' rights and duties. It particularly concerns when the agreement incorporates an arbitration clause. Moreover, international contracts are frequently designed in a comparatively standardised style, utilising the pretended boilerplate clauses. It occurs despite the fact that their main objective stands for regulating the contractual operations and interpretations. Their incorporation of the juridical connection between the parties makes the national law inessential. Thus, when this law appears as irrelevant, while the contract is a mere foundation for regulating the parties’ juridical intercourse, standardising of contract terms becomes crucial and meaningful. It occurs even if the agreement is supposed to be executed in a variety of legal systems. Nevertheless, the paper demonstrates that the literal application of clauses can actually challenge the fundamental principle of the applicable law. It means the principle of good faith. Therefore, the international contract practice demonstrates that it has to appear as comprehensive and self-sufficient, and not impacted by the interpreter’s legal tradition. Hence, any corrections performed on a basis of such principles as good faith would appear as counteracting towards the expectations by the sides.