Weitzenboeck

Electronic Agents and Contract Performance: Good Faith& Fair Dealing : Electronic Agents and Contract Performance: Good Faith & Fair Dealing Emily M. Weitzenböck, LL.M. (Soton), LL.D. (Malta) Norwegian Research Centre for Computers & Law University of Oslo emily.weitzenboeck@jus.uio.no 1st Workshop on the Law of Electronic Agents, LEA 2002 University of Bologna, Italy 13th July, 2002


1. Topics for Discussion : 1. Topics for Discussion Introduction Good faith as a guideline for contractual behaviour Briefly on precontractual duties of good faith Good faith in contract performance Civil law notion of good faith Is there a duty of good faith in common law countries? Where contracts are negotiated by agents, these would have to conform to such standards of behaviour


2. Precontractual duties of good faith (1) : 2. Precontractual duties of good faith (1) Both civil and common law systems regard the freedom of contracting parties as sacrosanct What if a contract not perfected or is invalid because of blameworthy conduct during precontractual stage? Development of doctrine of culpa in contrahendo Standards for precontractual behaviour: Duties of disclosure (obligations d’information) Precontractual liability sudden and unjustified rupture of negotiations no real intention to contract


2. Precontractual duties of good faith (2) : 2. Precontractual duties of good faith (2) English law No general duty to negotiate or perform in good faith … … BUT “developed piecemeal solutions in response to demonstrated problems of unfairness” (Interfoto, QB 1989) No duty of disclosure in negotiation stage save for fiduciary contracts … … BUT where this amounts to negligent misstatement or fraudulent representation, remedy available in tort Notion of implied terms Silence could be problematic where info relates to a fact that is deemed to be an implied term


2. Precontractual duties of good faith (3) : 2. Precontractual duties of good faith (3) English law (cont.) Harrison (1997): twin duties of candour and accuracy Precontractual breach of duty has no effect unless a contract has been made Re sudden and unjustified rupture of negotiations or no real intention to contract - basis of recovery on: Collateral contract, restitution and law of torts Whether or not common law courts ultimately embrace good faith, there is an inherent strength in the common law to police bad faith (Furmston, 1998)


3. Good faith in contract performance (1) : 3. Good faith in contract performance (1) Origin in bona fides German BGB §242 The debtor is bound to perform according to the requirements of good faith, taking into consideration ordinary practice in commerce. Treu (faithfulness, loyalty, fidelity, reliability) und Glauben (faith or reliance) Italian Codice Civile Good faith required in negotiation (art. 1337) & performance (art. 1375). Art 1175 on obligations in general provides that debtor and creditor shall behave in accordance with the rules of fairness (correttezza)


3. Good faith in contract performance (2) : 3. Good faith in contract performance (2) French Code Civil Art. 1334, para. 3 Contracts must be performed in good faith: (i) duty to act loyally (obligation de loyauté) (ii) duty to co-operate (devoir de coopération) Developed other notions founded on good faith, e.g. abus de droit Principles of European Contract Law Duty of good faith in formation, performance and enforcement of parties’ duties under a contract Duty to co-operate in order to give full effect to the contract


3. Good faith in contract performance (3) : 3. Good faith in contract performance (3) What about electronic agents? How can characteristics of “honesty”, “faithfulness”, “loyalty”, “fidelity”, “reliability” be portrayed by electronic agents? Good faith and fair dealing are objective concepts which refer to the behaviour of the honest businessman (Betti). France: in assessing whether the debtor of an obligation acted loyally, the court will examine whether he acted as a bonus paterfamilias.


3. Good faith in contract performance (4) : 3. Good faith in contract performance (4) Common law Steyn LJ: Good faith has a subjective requirement - the party must act honestly AND an objective standard “the observance of reasonable commercial standards of fair dealing in the conclusion and performance of the transaction concerned. Used in this sense, judges in the greater part of the industrialised world usually have no great difficulty in identifyng a case of bad faith. It is not clear why it should perplex judges brought up in the English tradition.”


3. Good faith in contract performance (5) : 3. Good faith in contract performance (5) Common law (cont.) US: UCC section 1-203: obligation of good faith in the performance or enforcement of contract Mirrored in Restatement of Contracts Second - §205 “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Good faith is defined in the UCC as: “honesty in fact in the conduct or transaction concerned” In the case of a merchant, good faith means “honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.” The emphasis here is on conduct and not on (subjective) intentions.


4. Final considerations : 4. Final considerations Focus on the objective requirement of good faith: Whether the agent has observed reasonable commercial standards of fair dealing in the negotiation and performance of the contract Twin duties of loyalty and co-operation should be given an objective interpretation Choice of the electronic agent for a particular use Electronic agents need to reach a more sophisticated technical level than the state-of-the-art of today Need for secure and reliable agents