Abdulali Jiwaji considers the courts’ application of the Braganza duty in relation to discretionary decisions
- The courts are increasingly recognising duties of good faith, especially in ‘relational’ contracts and where discretion is exercised.
- The Braganza duty requires discretionary decisions under contracts to be rational, honest and not arbitrary, and may be relevant across a number of sectors, including banking and insurance.
- Clear and prescriptive contract terms will help to reduce the scope for disputes, and leave less room for implied good faith or discretion-based duties.
For English law contracts, the concept of a duty of good faith has traditionally not been as relevant as in civil law jurisdictions. In recent years though, the courts have displayed more willingness to give recognition to such duties.
The types of contracts to which a duty of good faith applies is limited, but interestingly, we have seen the introduction of public law standards in respect of contractual decision-making, following the Supreme Court decision in Braganza v BP Shipping Ltd [2015] UKSC 17, [2015] 4 All ER 639.
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