Limits on Contractual Freedom

Abstract

This article is concerned with an important feature of English law that distinguishes it sharply from civilian systems of law and, to a lesser extent, from other common law systems—namely, its eschewal of an imposed duty of good faith and fair dealing. It will be shown that English law is receptive to such a standard in particular cases but that much of the ground that may be thought to be covered by good faith and fair dealing is covered instead by controls on the exercise of contractual discretion by reference to an implied contractual term that the discretion not be exercised in a way that is capricious, arbitrary, or irrational. This body of law has grown up in the last 30 years or so and has been influenced to a degree by public law considerations.