Should good faith in contracts be construed restrictively?

Abstract

This article deals with the principle of good faith in contracts, aiming to determine its actual scope in arm’s length agreements. It posits that the principle’s broad expression may lead to judicial overreach, potentially supplanting the parties will, and above all, exposing them to unnecessary litigation. To test these assumptions, this principle is analyzed from its origins in Roman law, its divergent evolution in common law and civil law systems and its regulation in the new Argentine Civil and Commercial Code. Subsequently, a distintion is made between subjective and objective good faith, the latter being, in general, that which is applicable to contracts. The article discusses the functions of good faith or, in other words, the purposes that good faith serves in contracts. It then sets forth the criticisms made the principle of good faith in contracts, pertaining to its lack of certainty, on the one hand, and the excessive power it grants to judges, on the other. Finally, the study develops a rationale regarding what the scope of this principle should be in arm’s length agreements, and it answers the question, less obvious than it seems at first glance, of whether the parties can agree not to have their contract reviewed under criteria linked to good faith.