Southern Perspective Shenzhen

Last week I talked about good faith. This principal is not unknown in other law systems. I would like to give you idea what good faith or bad faith means. The way I see good faith is — honest intent and non malicious conduct and bad faith would be the opposite. When you make an agreement with someone, your honest intent is to fulfill that agreement. The reason we enter into agreements, promises or contracts are to guarantee fulfillment. If this was not the basic fact of a contract, it would be worthless as the paper it is written on.  This seems like it has a bit of a DUH! factor going on but these principals are used in many laws. Let me give you a small look:

Contract law:

Article 6 The parties shall observe the principle of good faith in the exercise

of their rights and performance of their duties.

Article 42 A party shall be liable for compensation if he, in the course of concluding the contract, causes damage to the other party in one of the following situations:

1. he negotiates in bad faith under the pretext of concluding a contract;

2. he intentionally conceals a material fact relevant to the conclusion

of the contract or gives false information;

3. he engages in other acts that violate the principle of good faith.

Looking above at article 6, what does that even mean? What about article 42, “1. he negotiates in bad faith under the pretext of concluding a contract”? For the first example, it means acting in honesty or correct conduct and for the second, malicious behavior. For example, intentional trying to have a contract fail or breach.

Good faith and bad faith are a bit of catch-alls. They are general principals law might not be directly addressing or law that has not been developed yet. This is especially important for China, since the law system is in constant flux. In the country side, for example, updated national laws are not know yet or simply not followed.  This one catch-all of good faith and bad faith is a still constant and has been from the beginning.

This week I will give more examples of how good faith and bad faith are used.