DOCTRINE OF GOOD FAITH IN LAW

The accurate definition of good faith is very hard to obtain and has been a constant topic of
debate as to what is the standard or threshold which can be attached to it. Black’s Law
Dictionary provides the understanding of good faith as “Good faith is an intangible and
abstract quality with no technical meaning or statutory definition, and it compasses, among
other things, an honest belief, the absence of malice, and the absence of design to defraud or
to seek unconscionable advantage, and individual's personal good faith is the concept of his
own mind and inner spirit and, therefore, may not conclusively be determined by his
protestations alone, ... In common usage this term is ordinarily used to describe the state of
mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking,
means being faithful to one's duty or obligation”1

In India, it has been defined as “a thing shall be deemed to be in good faith where it is in fact
done honestly, whether it is done negligently or not.”2 Whereas, good faith can also be defined
as “Nothing is said to be done or believed in “good faith” which is done or believed without
due care and attention.”3 The section shall vividly deal with interpretation and the standard of
the extent of term ‘good faith’. Thirdly, Limitation Act, 1963 also tries to provide an
understanding of good faith which is negatively defined as “nothing shall be deemed to be in
good faith which is not done with due care and attention.”4

The difference of standard in both the definitions was highlighted in the case of Harbhajan
Singh vs. State5 and stated that the difference lies in the element of honesty, which needs to be
proved under the General Clauses Act but not under the Indian Penal Code (hereinafter
referred to as “IPC”). The court stated that “Simple belief or actual belief by itself is not
enough. The appellant must show that the belief in his impugned statement had a rational basis
and was not just a blind simple belief. That is where the element of due care and attention plays
an important role.”6

The court reached to the elements of due care and attention by stating that “in dealing with the
question of good faith, the proper point to be decided is not whether the allegations put forward

1
Black H C 1979 Black’s Law Dictionary. 5th ed. p 623.
2
The General Clauses Act, 1897, § 3(22).
3
The Indian Penal Code, 1860, § 52.
4
Th Limitation Act, 1963, § 2(h).
5
A.I.R. 1966 S.C. 97.
6
Id.
by the accused in support of the defamation are in, substance true, but whether he was informed
and had good reason after due care and attention to believe that such allegations were true.”7
But simultaneously, while holding these elements as the criteria to prove good faith, it must be
observed with the lens of a person, whose good faith is in the contention, in reference to the
circumstances of his or her situation, which may vary from one situation to another.8

In the case of Brijendra Singh vs. State of U.P.9, the court observed “Honest intent free from
taint of fraud or fraudulent design is a constant element of the connotation of “good faith”.
Even so, the quality and quantity of the honesty requisite for constituting “good faith” is
conditioned by the context and object of the statute in which this term is employed.”
Sometimes, courts took an excluder approach to define good faith as the “opposite to the
intention to deceive”10, which seems devoid of the elements mentioned in Harbhajan’s case.

Further, in the case of Kailash Sizing Works vs. Municipality of Bhivandi and Nizampur11
the court seemed to be in the opposite line of reasoning than Harbhajan’s case when it said
that- “the emphasis is on "good faith" i.e. honestly, and not on negligence. If municipality acts
in discharge of statutory duties, whether enjoined or authorised (permitted), as long as it acts
honestly, no action would lie against it even if it acted negligently. But if it did not act honestly,
the negligence would be actionable.”12 But this is just opposite to the holding in the case of
Kesharibhai Jesingbhai vs. Bai Lilavati and Ors.13, which said that “filing an appeal in wrong
Court must place material before the Court from which it is possible to deduce that the
lawyer acted in "good faith", in other words, "with due care and attention" and that a mistake
due to negligence or misconduct or want of reasonable skill on the part of the lawyer can by
no stretch be considered to fall within the definition of "good faith" as contained in section
2(7) of the Limitation Act.”14

After going through the general elements of good faith r/w statutes, it is imperative to dig
further and see the application of good faith through the case laws. In the case of Sunderlal vs.
Emperor15 the warrant of attachment instead of being signed by the Collector was signed by

7
Shibo Prasad I.L.R. 4 Cal. 124.
8
Emperor vs. Abdool Wadood A. I.L.R. 31 Bom. 293.
9
(1981) 1 SCC 597.
10
Army Headquarters vs. C.B.I. (2012) 6 SCC 228.
11
AIR 1969 Bom.127
12
Id.
13
AIR 1963 Guj 119.
14
Id.
15
(1993) Cri. L.J. 218.
the Deputy Collector and Treasury Officer. The Amin acted upon the warrant. It was held that
so far as the Amin was concerned the warrant appeared to him to be valid and the Amin acted
in good faith. But in Raghubir case16 the Amin proceeded to attach a person’s property when
the period fixed in the warrant of attachment has expired. It was held that the Amin did not act
in good faith.

Similarly in Prag’s case17 it was held that may be that executing party persons acted with best
of intentions and may have in fact believed even to have been entitled to act but if the Naib
tehsildar had examined the warrants, he would have seen that only S named in the warrants
was authorised to execute it and if he had considered the matter even for a moment he must
have realised that it was not within his power to authorise any other Amin to execute it.
Therefore, he was held not to have acted in good faith i.e., with due care and attention.

In Shimbhu Narain case,18 the accused who was an educated person living in a town where
medical attendance was available, chained up his brother, who was suffering from periodical
fits of violent insanity, for over three months in an unnecessarily cruel manner. It was held that
the accused did not act with due care and attention in as he did not avail of the medical care,
instead hastened to subject the victim to undue cruelty. In Sukaroo Kabiraj vs. Empress,19 one
Kabiraj who was uneducated in science of surgery, his knowledge being based on practical
experience only, operated on a man for internal piles by cutting them out with an ordinary
knife. The man died from haemorrhage. It was held that he had not acted in good faith although
he had performed similar operations on previous occasions.

In Hayat case20 the accused believed that a stooping child whom he caught sight of in the early
gloaming was a spirit or demon. The child was in a place which the accused and his fellow
villagers deemed to be haunted. The accused acting on this belief, caused the death of the child
by blows he inflicted before he discovered his mistake. It was held that the accused was guilty
of an offence under section 304A, IPC for causing death by negligence. No doubt he acted
under a mistaken belief but he did not in good faith believed himself justified in doing the act
because he did not act with due care.

16
1993 O.W.N. 67.
17
A.I.R. 1943 Oudh. 256.
18
1923 45 All. 495.
19
(1887) 14 Cal. 566.
20
(1887) P.R. No. II of 1888; AIR 1960 Cut. 88.
In the case of Suraj Bali21, a lady was operated upon by person for cataract with the result that
she lost her eyesight. It was proved that the operation which resulted in the loss of the eyesight
was performed in accordance with the recognised Indian method of treatment for cataract. It
was held that no offence was committed and that the defence was available under section 88
of the Code. Persons not qualified as medical practitioners cannot claim the benefit of this
section as they can hardly be deemed to act in good faith as that expression is defined in section
52, IPC.

If we observe the doctrine of good faith in commercial and contractual sense, there are many
interpretations provided with regards to the meaning and standard of good faith, some of which
includes “faithfulness to an agreed common purpose; acting within the spirit of the contract;
observing reasonable commercial standards of fair dealing22; and acting consistently with the
justified expectations of the parties.”23 While these interpretations seem good, which one is to
be applied where seems a greater challenge, and both parties can argue the definition which
favours their case. The implication of good faith can be recognized both as an express term as
well as implied principle of law24, especially in civil law countries25, but under English law, it
is the construction of the contract which decided the invocation of good faith principle.26

Since the context is Indian law oriented, in the case of Modern Insulators Ltd. vs. Oriental
Insurance Co. Ltd .27, the court stated “It is the fundamental Principle of insurance law that
utmost good faith must be observed by the contracting parties and good faith forbids either
party from non-disclosure of the facts which the parties know. The insured has a duty to
disclosure and similarly it is the duty of the insurance company and its agents to disclose all
material facts in their knowledge since the obligation of good faith applies to both equally.”28

Therefore, the principle is still quite vague and depends on circumstances and facts, and to
carve the doctrine under a straightjacket is both hard and unfeasible and the difference utmost
good faith and good faith is merely of degree of duty and responsibility to disclose information
important for both parties, lack of which might be detrimental to the contract itself.

21
28 A.W.N 566.
22
CPC Group Ltd. vs. Qatari Diar Real Estate Investment 2010] EWHC 1535 (Ch).
23
Justin Usher, Good Faith- Is there a new implied duty in English Contract Law?, Mayer Brown Publication.
24
SS Rana & Co., India: Doctrine of Good Faith in Contracts.
25
Good Faith in English Contract Law: Where are we now ?
26
Yam Seng PTE Ltd. vs. International Trade Corp. Ltd. [2013] EWHC 111 (QB).
27
(2000) 2 SCC 734.
28
Id.
This limitation, if looked prima facie may be criticized since it then becomes unreasonable to
expect a layman to work with a principle so un-concrete and be always on the right side of it,
which even the specialists of law have failed to define precisely for all seasons, but this should
rather act as opportunity and rather better mechanism as stated according to Jane Maria
Tomy29, where she said that the doctrine should be refrained from a strict definition and be
used as a tool to ensure the basic principles and flexibility which shall be according to the status
quo of standards in a particular society of the doctrine itself. She tried to give those broad
guidelines as “The term good faith would be used by the court (a) to limit a discretionary
contractual power so that it is exercised reasonably and for the intended purpose; (b) to ensure
that the parties work to secure performance of the main objects of the contract; and (c) to insist
that parties not evade contractual obligations.30

These observation clarifies the standard which courts seek to apply is not of a reasonable man
and the law does not require or expect straightjacket behaviour of attention and due care from
every person which is irrespective of his or her surrounding circumstances, and therefore, the
test is more inclined towards a subjective one (findings from Hayat’s case). Therefore, Good
Faith seems to rely upon three factors- The nature of the act done by the accused; the magnitude
and importance of the act done; and the honest facility a person has for the exercise of due
care and attention.

But again, a close observation also lands us to the confusion, which has emerged from the case
laws w.r.t. the standard of good faith. Courts have yet not been able to accurately judge these
standards. Kailash case totally ignored the due attention and care elements on the cost of honest
belief, while Harbhajan case seems to adopt the opposite line of reasoning while not taking
honest belief as the sole criteria to invoke good faith. The court is basically trying to convey
that if you act without due care and attention you cannot say that you are acting in good faith
however honest belief or true you believe it to be. The courts must avoid these two extremities
and must take a balanced approach.

29
Jane Maria Tomy, International Contacts II: Identify and Comparing the Trends in International
Contract Laws and Probing the Critical Issues for Multinational Contracting Parties, Chapter 6: Interpretation
of Good Faith in Contract Law.
30
Shannon Kathleen O'Byrne, The Implied Term Of Good Faith And Fair Dealing: Recent Developments, 86
The Canadian Bar Review, 193, 203, 2007.
In all types of Commercial contract debates, it is important for common law countries (for India
also) to imbibe the principle of good faith as a necessity without being in a need to be invoked
where seems likely as per court’s whim, which can be seen by the quote of J, Andrews “There
is no general doctrine of good faith in English contract law and such a term is unlikely to arise
by way of necessary implication in a contract between two sophisticated commercial parties
negotiating at an arms’ length”.31 Further, since no definition can as far justify exhaustively
the true sense of the doctrine, courts must always follow Tomy’s approach of applying the
concrete and well laid out guidelines in a given situation to fulfil the requirements of the
doctrine which is nearest to it’s intended meaning, causing no prejudice to any party.

REFERENCES & BIBLIOGRAPHY

COMMENTARIES
 Ratanlal and Dhirajlal, Indian Penal Code
 Hari Singh Gour, Penal Law of India
 GB Finch, A Selection of Cases on the English Law of Contract

ACTS & DICTIONARY

 Black’s Law Dictionary (5th Edition)
 Indian Penal Code, 1860
 The Limitation Act, 1963
 The General Clauses Act, 1897

CASES
 Harbhajan Singh vs. State of Punjab, AIR 1966 SC 97
 Shibo Prasad I.L.R. 4 Cal. 124
 Emperor vs. Abdool Wadood A. I.L.R. 31 Bom. 293.
 Brijendra Singh vs. State of Uttar Pradesh (1981) 1 SCC 597.
 Army Headquarters vs. C.B.I. (2012) 6 SCC 228.
 Kailash Sizing Works vs. Municipality of Bhivandi and Nizampur AIR 1969 Bom.127.

31
Greenclose Ltd. National Westminster Bank [2014] EWHC 1156 (Ch).
 Kesharibhai Jesingbhai vs. Bai Lilavati and Ors AIR 1963 Guj. 119.
 Sunderlal vs. Emperor (1993) Cri. L.J. 218.
 Raghubir 1993 O.W.N. 67.
 Prag A.I.R. 1943 Oudh. 256.
 Shimbhu Narain 1923 45 All. 495.
 Sukaroo Kabiraj vs. Empress (1887) 14 Cal. 566.
 Hayat AIR 1960 Cut. 88.
 Suraj Bali 28 A.W.N 566.
 CPC Group Ltd. vs. Qatari Diar Real Estate Investment 2010] EWHC 1535 (Ch).
 Yam Seng PTE Ltd. vs. International Trade Corp. Ltd. [2013] EWHC 111 (QB).
 Modern Insulators Ltd. vs. Oriental Insurance Co. Ltd (2000) 2 SCC 734.
 Greenclose Ltd. National Westminster Bank [2014] EWHC 1156 (Ch).

ARTICLES
 Justin Usher, Good Faith- Is there a new implied duty in English Contract Law?, Mayer
Brown Publication.
 SS Rana & Co., India: Doctrine of Good Faith in Contracts.
 Good Faith in English Contract Law: Where are we now ?
 Jane Maria Tomy, International Contacts II: Identify and Comparing the Trends in
International Contract Laws and Probing the Critical Issues for Multinational Contracting
Parties, Chapter 6: Interpretation of Good Faith in Contract Law.
 Shannon Kathleen O'Byrne, The Implied Term Of Good Faith And Fair Dealing: Recent
Developments, 86 The Canadian Bar Review.

NOTE: (All Other Uncited Sources, which were precious e.g.- SCC, Westlaw, IndianKanoon
etc.)