About the author
Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.
Ken:
My biggest problem with “good faith” compared to “reasonable” is that “good faith” invites greater discovery in disputes. If I was trying to prove you acted in bad faith, I would want to (a) read all your email to see if you said something bad and (b) read your financials to see if you might have had an ulterior motive. By comparison, if I was trying to prove unreasonableness, I would look to industry standards, expert opinions, and the like. The difference between these is that the email and financial trawl places enormous costs on the defendant, where the objective standard places the costs first on the plaintiff (and then also on the defendant if the plaintiff can produce decent evidence)
If I can’t prove my unreasonableness case that way, then I’m going to argue that acting reasonably includes a duty to act in good faith. After all, how reasonable is it to meet objective standard while deviously intending a malicious outcome? The defendant’s counter-argument is that any possible expressions of bad faith and any ulterior motives are irrelevant if you meet an objective standard because the ill intent obviously did not affect your performance (i.e. there is a implication of a break in causality and the defendant will challenge the plaintiff to identify what the defendant should have done in excess of acting reasonably to mee the good-faith requirement).
If the plaintiff’s argument is correct as a matter of law rather than of contract construction, then it is silly to ever say “acting reasonably and in good faith.” But if it is a question of contract construction, then including at least one instance in an agreement where you say “acting reasonably and in good faith” can help defeat this argument. If we have meant to impose an obligation of good faith, we would have done so, like we did in this other section.
Chris
Because “good faith” means “honesty of purpose,” I DO like to use it with “reasonable,” which is the objective test you say. If picking one, I agree with you; but, I don’t agree that using both is a waste of space.
Steve: If you want to convince me, you’ll have to give me an example and work through it, bit by bit. Ken
The ACA combines both terms to be used as the interpretation standard for the act. What do you make of that?
Are we to make a good faith effort to be reasonable in our interpretation?
Have you discussed a blanket provision that requires all acts or omissions by either party to be reasonable?
No, because it wouldn’t make sense. Maybe you can rely on the implied duty to act in good faith.
Note that in certain states like Texas, there is no implied duty to act in good faith.