GOOD FAITH IN CONSTRUCTION CONTRACTS

UNDER FRENCH LAW AND SOME COMPARATIVE

OBSERVATIONS WITH ENGLISH LAW

PETER ROSHER

Partner, Avocat à la Cour & Solicitor (England and Wales),

Pinsent Masons France LLP

If cash flow is the lifeblood of the construction industry, then good faith is
a vital artery. Like any contracts, construction contracts come in all shapes
and sizes and serve a diversity of purposes. There are, however, a number
of important factors that make construction contracts different, particularly
when operating in an international context. These include the length of the
project, its complexity, the size and the fact that often the price agreed and
the amount of work to be done may change as a project proceeds1. In long-
term construction contracts and in – increasingly prevalent – partnering
or alliancing type contracting, the need to regulate future cooperative
ventures goes to the core of a project’s potential success. A failure by one or
more of the parties to comply with certain standards of honest conduct and
to cooperate in order to achieve the contractual objectives can hit profit
margins long and hard.
The first and primary part of this paper will examine the application of
the duty of good faith under French law, the aim being to dispel a stubborn
misconception which persists outside the Hexagon. Contrary to popular
myth, French law does not embrace a free-floating good faith norm applied
by French judges at their liberal discretion in order to cure what he or
she considers unfair or unreasonable, even when this goes beyond, or is
inconsistent with, the agreed terms of the parties’ contract. This view is
fundamentally misconceived with respect to contractual performance. It
is more nuanced than some would have it believed with respect to pre-
contractual negotiations. The second part of this paper will then outline
briefly the current state of the law regarding good faith duties across the
Channel, in England and Wales, where an incremental approach has
taken and – despite regular tugs – held root. This will lead to some final
comparative observations.
Before turning to examine the French and English law positions, it is
helpful to bear in mind the following general preliminary remarks:
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1
Risks can include factors that affect the progress of the works like unforeseen ground conditions
or a change in the premise on which risk was allocated by the parties at contract formation because, for
example, of a change in the availability of materials and its cost.
 Pt 3] Good Faith in Construction Contracts Under French Law 303

• “Good faith”, as a phrase, is morally loaded. It has eluded attempts at

authoritative definition. While, however, its precise content remains
nebulous, in very broad terms, it generally involves compliance
with honest standards of conduct and cooperation by the parties
to achieve their contractual objectives. Certain authors have thus
preferred to adopt instead more neutral terminology such as fidelity
to the bargain and fair dealing2.
• For the purposes of this paper, the term “good faith” is used in a
commercial non-fiduciary context, distinct from relationships
involving the notion of trust inherent in fiduciary relationships3.
• On both sides of the Channel, construction contracts are regulated
primarily by the ordinary rules of contract law4. No special body of
rules applies to construction contracts, whether they are described
as building, engineering or construction contracts. In examining the
position relating to French (and English) law, therefore, reference is
necessarily made to relevant general contractual principles. To the
greatest extent possible, however, focus has been placed on cases
relating to the application of good faith in the construction industry.

1. GOOD FAITH IN FRENCH LAW

In this section, after some introductory remarks (A), we will examine the
application of good faith in contract performance (B), followed by its
application at the contract creation stage (C) before finally looking at the
sanctions available under French law which provide helpful insight into the
contours ascribed to the French law duty of good faith (D).

A. General introductory remarks

The duty to negotiate and to perform a contract in good faith applies
automatically under French law, whether or not it is expressly included in
the contract itself, in a letter of intent or other pre-contractual agreement.
Parties cannot derogate from this principle by contract5. Thus, if French
law applies (under an express governing law clause or, absent such a clause,

2
See, for example, E Allan Farnsworth, “Good Faith in Contract Performance”; H K Lucke “Good
Faith and Contractual Performance” in Finn (ed) Essays on Contract p 155.
3
A signal example are insurance contracts. In such fiduciary relationships, the fiduciary subordinates
its interests in favour of the beneficiary which reflects the degree of power or control exercised, the
vulnerability of the beneficiary and the service provided by the fiduciary.
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4
Subject, of course, to specific legislative enactments such as, in France, Law No 75-1334 of
31 December 1975 relating to sub-contracting or, in the UK, the Housing Grants, Construction and
Regeneration Act 1996.
5
F Terre, P Simler and Y Lequette, Les obligations, 11e éd, Dalloz 2013, no 439. P Delebecque,
JurisClasseur Contrats – Distribution, Fasc 110: Clauses d’allégement des obligations, §121. P Le Tourneau and
M Poumarede, “Bonne foi” in Répertoire de Droit Civil, Dalloz January 2009 (updated: October 2014), §17.
 304 The International Construction Law Review [2015

due to other relevant factors connecting the situation with France), the
French law duty of good faith will apply to the parties’ negotiations and to
their performance of the contract. This duty applies to any kind of contract,
including international and domestic construction contracts.
This obligation results from the third sentence of Article 1134 of the
French Civil Code which provides that: “agreements lawfully entered into
[…] must be performed in good faith”6. The duty of good faith and its
associated obligations under French law derive from this third sentence.
However, it is difficult to grasp precisely at first sight what is meant by the
third sentence of Article 1134, and the scope of the notion of good faith.
Good faith is classically defined as the expression of the duty of loyalty by
each co-contractor so as not to offend the confidence that gave rise to the
contract. The parties must act towards each other with loyalty and honesty,
without malice or fraud. If this principle was originally considered as a
simple attitude to be adopted by the parties so that they complied with the
law, it is today considered to be a core principle in the performance of a
contract. Both the interpretation of the contract and the manner in which
the parties must behave are scrutinised in the light of this obligation of
good faith. Some authors have even described the duty of good faith as a
general principle of French contract law7.
In France, this vague duty of good faith has been defined and given clarity
by judicial decisions, the cumulative effect of which has produced rules
relating to the contract performance obligations and to the pre-contractual
obligations on the parties. The development of the doctrine in France has
also been determined by the nature of the contract being considered. The
courts have developed different types of duties, based upon the general
obligation of good faith, specific to certain categories of contract. In the
context of construction or engineering contracts, some authors have
considered that the duty of good faith acquires a particular importance in
contract performance. According to these authors, engineering contracts,
complex industrial contracts and construction contracts, which fall under
the common French denomination of “contrats d’ingénierie et de transferts
de maîtrise industrielle”, require a high level of cooperation and mutual
trust between the parties, as a result in particular of their magnitude and
technical complexity8. As we will see below, French courts have consequently
developed rules which relate specifically to the scope of the duty of good
faith in a construction contract context (for example, there is authority

6
“Les conventions légalement formées […] doivent être executes de bonne foi.” Official translations
available at http://legifrance.gouv.fr.
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7
F Diesse, “Le devoir de coopération comme principe directeur du contrat” Archives de philosophie du
droit 43 (1999), p 261. C Jarrosson, “La bonne foi, instrument de moralisation des relations économiques
internationales”, dans (Collectif) L’éthique dans les relations économiques internationales, en hommage à
Philippe Fouchard, 2006 Pedone, p 185, spéc no 11.
8
P Le Tourneau and M Poumarède, “Bonne foi” in Répertoire de Droit Civil, Dalloz January 2009
(updated: October 2014), §75-76.
 Pt 3] Good Faith in Construction Contracts Under French Law 305

that the developer must provide all relevant data necessary to the proper
completion of the project by the engineer as part and parcel of his duty of
good faith).
At its genesis and for many decades, the duty of good faith under French
law was applied solely to contractual performance obligations once a
contract had been entered into by the parties. This was originally conceived
as the sole function of the duty. It was only in the middle of the twentieth
century that the obligation of good faith was extended by the French courts
to encompass pre-contractual negotiations. We will therefore start by first
looking at good faith in contractual performance before then turning to its
evolution and application in the context of contract formation.

B. Good faith and contractual performance

French case law has developed associated duties imposed upon the parties
which result from the application of a general duty of good faith. The
principal duties associated with the duty of good faith may be summarised
as follows:
• a duty of contractual loyalty;
• a duty of cooperation/collaboration;
• a duty of coherence; and
• a duty of information.

Duty of contractual loyalty

When performing the contract, the duty of loyalty results in several
consequences. Firstly, it prevents the party which is supposed to pay the
other party to perform the contract from acting in a way that would render
the performance impossible or more difficult: this party cannot deliberately
place the other party in an adverse position with respect to the performance
of the contract. The French Cour de cassation (the French Supreme Court)
has, for example, considered that a party who deliberately notified the other
contracting party of an order during a holiday period, knowing that the
latter was out of the office and thus rendering it impossible for the other
party to perform the order on time, was in breach of its duty of good faith9.
Concerning construction contracts, the duty of loyalty has mainly been
applied by French courts vis à vis employers, who must avoid taking actions
that could interfere with the proper execution of the works. For example,
French courts have considered that an employer who had modified the
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9
Cass 3e civ, 16 October 1973: Bull civ 1973, III, no 529 – Cass 3e civ, 29 June and 15 December 1976:
RTD civ 1977, p 340, obs. Cornu (One of the parties tried to terminate the contract and sent a notice
to the other party while that party was away – deliberately knowing this fact. The Cour de cassation
considered the obligation of good faith had not been respected and the contract could not thus be
terminated.)
 306 The International Construction Law Review [2015

plans for the works in an incoherent manner was in breach of its duty of
good faith10. Contractual loyalty can result in a multitude of obligations for
the parties. They may be subject to a duty of vigilance. They may also have
to act with fidelity to the spirit of the contract, to respect the interests of
their contracting partners and to respect proportionality and equilibrium
of the contract. In agreements where the “affectio contractus” is strong,
parties are subject to a duty of transparency and of contractual honesty.

Duty of cooperation/collaboration
The obligation of cooperation is the most important duty associated with
the obligation of good faith. It is designed to facilitate the execution of the
contract. French Professor R Demogue has considered that this obligation
implies that the parties “must work together toward a common goal, which
is the sum of their individual goals”11. The obligation of cooperation or
collaboration thus has a more dynamic and positive dimension to it than
the obligation of loyalty. The obligation of loyalty only prevents a party from
making the performance of the contract more difficult: the obligation of
cooperation actually creates an obligation to facilitate contract performance.
Under this duty, a party must do everything in its power to ease the other
party’s performance of its obligations. For example, French courts have
considered that a ship owner must render the requested international
shipment possible by providing to the transporter all necessary documents
in order to clear customs12. Related to this duty is the obligation of a party
not to make the other party bear frivolous or avoidable costs (by choosing
the least expensive itinerary for the transporter, for instance).
Once again, in construction contracts, this obligation has been found in
French case law to rest with the employer. For example, the employer must
allow the contractor access to the site, deliver the contracted goods and
materials, give the contractor all information needed and more generally
fully cooperate with the contractor13. An employer must also facilitate the
coordination of different employees and representatives working together
on the project, the continuous participation in the testing of the works
10
Cour de cassation, 3e civ, 22 May 1968, no 65-12.586 (During the execution of works on a hospital
project, the employer modified the construction plans many times. The contract allowed the employer
to submit changes to the contractor, with appropriate indemnification. However, the Cour de cassation
considered that the changes submitted by the employer in this case had caused a very high increase in
the quantity of work and were issued incoherently, which caused the suspension of the works on several
occasions. Thus the court considered that the employer had interfered with the performance of the
works and should pay damages to the contractor.)
11
Free translation (Chaque partie “doit travailler dans un but commun qui est la somme des buts
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individuels poursuivis par chacun”). R Demogue, Traité des obligations en général, T IV no 3, p 9 (cité
par F Diesse, “Le devoir de coopération comme principe directeur du contrat”, Archives de philosophie du
droit 43 (1999), p 262).
12
Cour de cassation, Civ, 10 April 1929 (mentioned in P Le Tourneau and M Poumarède, “Bonne
foi” in Répertoire de Droit Civil, Dalloz January 2009 (updated: October 2014), §84).
13
A Bénabent, JurisClasseur Contrats – Distribution, Fasc 425: Contrat d’entreprise, §239.
 Pt 3] Good Faith in Construction Contracts Under French Law 307

and, ultimately, participation to the final taking over14. There are, however,
limits to the scope of the duty of cooperation – too close an intervention
by the employer in the construction of the works could otherwise be
considered as being disproportionate and as detrimentally interfering with
the contractor’s work. Such interference may take the form of the employer
taking physical control of the execution of the works in practice15. When
such interference takes such a form, the employer may then be considered
partly liable for any disruption and defects that are noted at the taking over
stage16.
The collaboration duty also imposes on a party an obligation to inform
the other party, during the performance of the contract, of events that may
impact the performance of which the other party should be made aware.
This duty is distinct from the pre-contractual obligation of information. Even
if this duty is sometimes expressly provided by the law in some fields, the
case law has extended its existence, making it a general duty under French
contract law. Such duty of information has for example been recognised
concerning lawyers or architects17.

Duty of coherence
French courts also created an implied duty of acting with coherence. The
parties must adopt a coherent attitude and may not behave in a contradictory
manner to the detriment of the other contracting party. For example, a
party who suddenly operates the termination provisions in a contract after
failing to exercise its rights under such clause for years on end has been
found to have acted incoherently and thus contrary to the obligation of
good faith18.

14
P Le Tourneau, JurisClasseur Contrats – Distribution, Fasc 1820: Ingénierie et transfert de maitrise
industrielle – Conception, §92.
15
Cour de cassation, 3e civ, 7 March 1990, no 88-13.133 (The Cour de cassation considered that
the employer who expressly ordered the contractor to build certain types of inadequate work products
should be held responsible for the defects in these works) and 7 May 1996, no 94-17.221.
16
Cour de cassation, 3e civ, 24 June 1992, no 90-11.989 (The contract concerned the construction
of a group of buildings. The employer sued the contractor for damages, as failings were observed
after the final taking over. However, the Cour de cassation rejected the employer’s demands and held
that the employer was liable for damages as he had decided the technical measures that were taken
during the works) and 6 March 2002 no 00-10.358 (The Cour de cassation ruled here again that the
employer had to be considered partly liable for the defects in the works as it had interfered with
their execution, in particular by imposing different materials from those provided in the plans and
specifications of the works.)
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17
See for instance, Cour de cassation, 1 ère civ, 29 April 1997, no 94-21217.
18
Cour de cassation, 1re civ, 16 February 1999, no 96-21997 (Mrs X had sold her apartment for an
annuity to her niece. The contract included a termination clause that could be operated in the event
that the niece did not pay the annuity. The niece did not pay for 12 years during which Mrs X never
protested but suddenly Mrs X operated the termination clause. The Cour de cassation considered such
behaviour contrary to the obligation of good faith and thus held the clause to be inoperative).
 308 The International Construction Law Review [2015

Duty of information
The obligation of information also plays a significant role in the performance
of construction contracts. This obligation rests with both the employer and
the contractor. The employer has a duty to inform the contractor of any
important information that is needed for the execution of the works. For
example, French courts have considered that the employer should make
the contractor aware of adverse ground conditions when these exist19, of
the existence of caves around the site20 or of the presence of pipes that may
damage the contractor’s materials21.
The contractor also has an obligation of information since it should
comment on the employer’s decisions and specifications. It should inform
the employer when it considers that executing the contract in the way
specified might in fact be harmful. It should also – as should the architect
if one is engaged on a project – advise the employer about the choice of
materials. For example, the French Cour de cassation decided that an
architect did not comply with its obligation of information in a case where
he did not draw the attention of the employer to the necessity to paint with
protective paints the steel structure of the works22. The French Supreme
court also considered, for example, that a shipyard contractor had to warn
the employer that the costs of the repair works executed on the ship were
going to be higher than the price of a new ship23. Of course, the principal
responsibility for the duty of information is often imposed on the engineer,
as it is generally the engineer’s role to advise and to inform the employer on
the performance of the works24.

Dispelling a myth
Therefore, in the light of the above, it can be seen that during the
execution of the contract, the duty of good faith reinforces the obligation

19
CE 17 February 1971: Rec Cons d’Et, Tables, p 1110 (In the execution of a public construction
contract, the contractor cannot be found liable for failings due to bad ground conditions. The employer
should have informed the contractor and ordered specific precautions accordingly).
20
Cour de cassation, 3e civ, 4 July 1979: Gaz Pal 1979, pan jur 475 (mentioned in A Bénabent,
JurisClasseur Contrats - Distribution, Fasc 425: Contrat d’entreprise, §239).
21
Cour de cassation, 1re civ, 17 March 1969: D 1969, 532 (Clearing works for the ground of a future
quarry had been attributed to a contractor. One of the contractor’s bulldozers hit an underground gas
pipe causing an explosion and destroying the bulldozer. The employer was found responsible for the
damages, as he knew of the existence of the pipe but had not informed the contractor).
22
Cour de cassation, 3e civ, 18 June 1997, JurisData no 1997-002885 (The contract related to the
construction of a factory. When water seepage occurred later, the architect was found liable for not
complying with his obligation of information as he did not inform the employer about the necessity to
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paint the structure with special protective paint).

23
Cour de cassation, Com 16 March 1982 n 80-15256 (The contract included the sale of a second-
hand boat and the execution of repair works on the boat. The Cour de cassation considered that the
contractor had not complied with his duty of information as the cost of the repair works appeared to be
higher than the price of a new boat.)
24
A Bénabent, JurisClasseur Contrats – Distribution, Fasc 425: Contrat d’entreprise, §148.
 Pt 3] Good Faith in Construction Contracts Under French Law 309

of the parties to comply strictly with contractual provisions and to respect

the spirit of the contract. When French courts are asked to judge whether
parties are correctly performing the contract, they may use the duty of good
faith to sanction a party which does not behave properly or does not act in
a way that would be normally expected having regard to the purpose of the
contract and the context of performance.
However, in doing so, French courts must be careful not to exceed the
limits of their powers. A firm principle of French contract law is that the
courts cannot create new extensive obligations that were not set out in
the contract or provided for by the parties. Thus, even if courts consider
that some obligations were implied in the contract, such as the duty of
information for example, they cannot create obligations that were not
part of the obligations the parties had chosen to comply with. Here, it is
important to bear in mind that the first sentence of Article 1134 of the
French Civil Code imposes that: “agreements lawfully entered into have the
force of law for those who have made them”25. This principle, enshrined in
the French civil code, is an established principle of French contract law. It
means that parties have to respect the obligations contained in the contract
they concluded, but only those obligations. Therefore, the principles set
out by first and third sentences of Article 1134 must always be balanced
against each other.
This has led several authors, in particular Professor Philippe Stoffel-Munck,
a renowned expert on the civil law of obligations, to consider that the use of
the principle of good faith by French courts may not lead them to modify
the scope of obligations contained in the parties’ contracts. Therefore,
what may already be said at this stage is that the duty of good faith under
French law only applies in relation with obligations that exist, and, contrary
to popular belief, there is no general obligation at law imposing on parties
specific duties that are not closely linked to obligations already contained
in a contract. The French Cour de cassation seems to have confirmed this
(and we will deal with this further below) as it ruled in 2007 that: “although
the rule according to which contracts must be executed in good faith allows
a court to sanction an abusive use of a contractual prerogative, it does not
authorise the court to undermine the very substance of the rights and
obligations legally contracted by the parties”26.
Judges cannot impose on the parties new obligations with which the parties
had not agreed to comply. The risk for a lower court in doing so would be
to see its decision subsequently overruled by the Cour de cassation which
controls strictly the kind of obligations that may be considered as resulting
from the duty of good faith. Thus, for example, French judges cannot
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impose new obligations on parties because of a change of circumstances

25
Free translation.
26
Cour de cassation, Com 10 July 2007, no 06-14.768, free translation.
 310 The International Construction Law Review [2015

during the performance of the contract. This said, the Cour de cassation has
already accepted that in some cases the duty of good faith and its associated
obligation of cooperation may impose on a party the duty to renegotiate the
contract when a change of circumstances has rendered the performance
completely unprofitable for a party27. But this has been strongly criticised
and the case law is not really clear on the matter28.
The implication of good faith is not made generally. Rather, it operates as
an informing principle to shape the content of the particular implication.
Perhaps because the obligation is referred to as “bonne foi” and thus rooted
linguistically in terms of a moral duty, it has been wrongly supposed that it
has a source of authority from outside of the contract. The concept is tied
however to the contract and relates to the honest and fair performance
of what has been agreed rather than the superimposition of moral values
having scope outside of the contract and operating beyond the agreement
of the parties.

C. Good faith at contract formation

Even if Article 1134 of the Civil Code deals with contractual performance
and does not address the contract negotiations phase, French case law has
extended the duty of good faith to the pre-contractual stage, in marked
contrast to English law. The implied duties associated with the principle
of good faith when negotiating the contract are similar to those that are
imposed on parties with respect to contractual performance. Preliminary
negotiations may result in pre-contractual liability under French law in
circumstances where, for example, there has been an abusive and unjustified
rupture of negotiations; a failure to cooperate and/or no real intent to
contract; parallel negotiations conducted in bad faith; or failure to disclose

27
Cour de cassation, Com 3 November 1992 “Huard” (The case concerned a distribution agreement
between oil companies. As the oil price had varied significantly over the time, the contract became
wholly unprofitable for one of the companies. The Cour de cassation considered that the company
that did not wish to renegotiate the contract was in breach of its the duty of good faith). 24 November
1998 “Danone” (The contract in issue was a distribution agreement. The agent of Danone for the Indian
Ocean zone was in competition with other distribution agencies and was not able to sell Danone’s
products at a competitive rate. The Cour de cassation considered that Danone, because it did not allow
its agent to sell the products at a lower price, was in breach of its obligation of good faith). See also 1ere
civ 16 March 2004.
28
Even if some isolated decisions have imposed a duty to renegotiate the contract when a change
of circumstances has rendered the performance unprofitable for a party, the leading case on this issue
is an old decision from the Cour de cassation, “Canal de Craponne”, dated 6 March 1876 in which the
court declared that: “it is no part of the function of courts, however equitable it may seem to them, to
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modify the parties’ agreements in the light of changing times and circumstances or to substitute new
terms in the place of those freely accepted by the parties”. See also criticism from eminent French
jurists regarding the isolated decisions and, in particular, by J Ghestin, C Jamin & M Billiau in “Traité
de droit civil. Les effets du contrat” Paris, LGDJ 1994, no 269 and by C Jamin in “Révision et intangibilité
du contrat, ou la double philosophie de l’article 1134 du Code civil”, Droit et Patrimoine, March 1998,
no 58, pp 46 et seq.
 Pt 3] Good Faith in Construction Contracts Under French Law 311

material facts29. As soon as pre-contractual negotiations begin, the parties

must act in compliance with their duty of good faith and this duty affects
the way in which negotiations should be conducted and the way in which
they are terminated.
Breaking off preliminary negotiations (“rupture abusive de pourparlers”)
does not of itself constitute a fault, absent bad faith. Bad faith is judged on
the basis of all of the circumstances. Parties will be particularly vulnerable
to claims of “abusive breaking off of negotiations” if negotiations have been
lengthy and conducted with a real likelihood that they would lead to a
binding agreement. It will also often be the case where one of the parties
pulls out of discussions without warning. Due to their duty to act in good
faith, parties will therefore be prohibited from walking away “abusively” or
without legitimate reason from the negotiating table at a critical stage in
their discussions30.
The French Cour de cassation has, for example, considered that a
company breached its duty of good faith when it had engaged in negotiations
with another company relating to the manufacturing of cement pipes,
and organised business trips to view the products, but suddenly stopped
answering calls and letters from the other company and then concluded a
contract with a direct competitor, only announcing the end of negotiations
by way of a brief telephone call without any legitimate justification31.
In relation to negotiations concerning a car dealership contract that
were suddenly broken off by the company (Rover), the Court of Appeal
of Riom adopted a very similar solution and held in unequivocal terms
that: “if freedom [of contract] is the main principle in the pre-contractual
period and includes the freedom to break off negotiations at any time, it is
still true that when the latter have reached a length and level of intensity
such that one party may legitimately believe that the other is about to
conclude the contract and in readiness encourages him to incur certain
expenses, breaking off such negotiations is wrong, causes loss and gives rise
to reparation”32.
Key considerations that militate in favour of liability for abusive breaking
off of negotiations appear to be the advanced stage of negotiations
combined with the amount of work already undertaken and the abruptness
of the breaking off of negotiations.
However, this obligation has to be nuanced. It is important to understand
that it does not prohibit a party from terminating negotiations. Courts may
well consider that a party respected its duty of good faith even if it suddenly
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29
Paula Giliker, Pre-contractual Liability in English and French Law (Kluwer 2002) at pp 126–128.
30
P Le Tourneau and M Poumarède, “Bonne foi” in Répertoire de Droit Civil, Dalloz January 2009
(updated: October 2014), §32-37.
31
Cour de cassation, ch com, 20 March 1972, no 70-14.154.
32
Court of Appeal of Riom, 3e ch 10 June 1992, Rev jurisp dr aff 1992, no 893, p 732 (mentioned in
J Mestre “De diverses références à la négociation précontractuelle”, RTD civ 1993, 343).
 312 The International Construction Law Review [2015

breaks off negotiations, if that party is able to justify this decision with a
legitimate reason33. The attitude and experience of the party claiming that
it has suffered from a breach of the duty of good faith is also considered by
the courts. For example, courts have already considered that a professional
party who had made – prior to the conclusion of the contract – major
investments that caused its bankruptcy when the other party broke off the
negotiations was partly responsible for the damages which the breakdown
caused34. The French Cour de cassation has also reminded contracting
parties that: “parties must always keep in mind the possibility of a failure of
the negotiations”35. More generally, a breach of the obligation of good faith
will be more likely to be found where the party that suffers from a brutal
break off of negotiations is a non-professional party.
Any decision to break off negotiations will thus need to be handled
carefully. Contractors and employers should keep in mind that they
must always justify their decision to breaking off by reference to objective
criteria. An abrupt termination with no explanation may be considered as a
breach of good faith by French courts (particularly, as we have seen, where
negotiations have been lengthy and the potential deal draws closer). Parties
can strengthen their position by recording in writing as many exchanges as
possible which may justify termination. A legitimate ground for breaking
off negotiations is a defence against a claim for unjustified breaking off
of negotiations. Depending on all of the circumstances, financial reasons,
a change in circumstances, or the parties’ inability to agree on key points
could constitute legitimate justifications for breaking off negotiations36.
French case law has also considered that some kind of duty of confidentiality
results from the obligation of loyalty that is due by parties under the general
principle of acting in good faith. This duty of confidentiality imposed on
negotiating parties implies that, if confidential information is given by
one party in the course of negotiations, the other party may not disclose

33
Cour de cassation, Com 20 November 2007, no 06-20.332 (Two companies engaged in negotiations
relating to the joint development of private medical centres. One of the parties had declared that some
elements concerning the financial and legal situation of the other company needed to be checked first
but that an agreement could be signed subsequently. Following the discovery of the dire financial and
legal situation of its partner at an advanced stage of negotiations, the company decided to pull out of
the negotiations. The Cour de cassation considered the decision had been taken for legitimate reasons.)
34
Cour de cassation, Com 15 October 2002, no 00-13.738 (A company established a very close relation
with another company and encouraged it to produce a high quantity of products, inferring that it would
buy these products in the event that a specific event occurred. The said event never happened and
the company never bought the products. The other company went bankrupt. The Cour de cassation
considered that the parties had a shared responsibility for the bankruptcy, as the bankrupted company
should have been more careful before investing so much).
©Informa null - 28/11/2018 17:26

35
Cour de cassation, Com 4 October 1982, Juris-Data no 702028 (The project concerned the
production of 500 buses. Since the conclusion of this contract depended on the general economic
context, the Cour de cassation considered that, in starting the production of some parts for the buses,
one of the companies had not been cautious enough. Thus it ruled that the other company, which broke
off the negotiations, did not commit any breach in its obligation of good faith).
36
Paula Giliker, Pre-contractual Liability in English and French Law (Kluwer 2002) at p 125.
 Pt 3] Good Faith in Construction Contracts Under French Law 313

or reveal this information and should not use it, even in the absence of
a confidentiality clause in a preliminary agreement. A party who uses or
disseminates such information without authorisation from the other party
commits a tort (“concurrence déloyale” or “parasitaire”)37. French courts will
sanction a party who used for its own purposes such information, whether or
not a contract is subsequently concluded38. French courts do not require a
finding of intent to harm the other party in order to impose pre-contractual
liability39. Although evidence of such intent would support a claim of bad
faith, liability is not dependent upon a finding of malicious intent.
Finally, when a contract is about to be concluded, French case law imposes
a general duty to inform the other party based on the parties’ obligations
of good faith. This obligation is also sometimes qualified as a duty of
transparency. It means that each negotiating party is bound to inform his
partner of all matters that would enlighten him when reaching his decision
and which could be decisive in giving his consent. In sales contracts, the
pre-contractual obligation to inform usually falls on the vendor. In one case
however, it was found that a purchaser, better informed than the vendor by
virtue of his profession, was bound to inform the vendor of the bad deal he
was about to make, but the French Cour de cassation has put an unequivocal
stop to this, in ruling that a purchaser, even if a business or professional, is
not bound by an obligation to inform the vendor of the actual value of the
goods purchased40.
In the specific context of construction contracts – to which, of course, the
above general contractual principles apply – the associated obligations of
loyalty, cooperation and information implied by virtue of the duty of good
faith during the negotiation period are very important both for the employer
and the contractor. More particularly, the obligations of information and
cooperation impose on the employer the duty to inform the contractor
about the project at stake, its specifications, the precise goals that have to
be achieved and its general purpose41. However, once again, the scope of
this obligation has to be nuanced. The extent of the pre-contractual duty
of information is indeed limited by French case law. Courts always balance
the different parties’ obligations. For example, it is considered that the
contractor must always ask for additional information when necessary,

37
Com 3 October 1978; Bull civ IV, no 208; 3 June 1986, Bull civ IV, no 110.
38
P Le Tourneau and M Poumarède, “Bonne foi” in Répertoire de Droit Civil, Dalloz January 2009
(updated: October 2014), §38-39.
39
Cour de cassation, 3e civ, 3 October 1972, Bull civ III, no 491.
40
Cour de cassation, 1re civ, 3 May 2000, no 98-11381, Baldus (A seller sold pictures of a famous
photographer for a very low price. The buyer knew the actual price of the pictures but did not tell the
©Informa null - 28/11/2018 17:26

seller. The Cour de cassation considered that the buyer – who was not a professional – did not have any
obligation to inform the seller); Civ 3ème, 17 January 2007, no 06-10442 (A non-professional party sold
a house to a real estate agent for a very low price. The Cour de cassation considered that the buyer, even
if professional, did not any obligation of information about the actual fair price).
41
P Le Tourneau, JurisClasseur Contrats – Distribution, Fasc 1820: Ingénierie et transfert de maitrise
industrielle – Conception, §90.
 314 The International Construction Law Review [2015

especially where the employer does not have much experience in this
particular type of project at stake42. In all cases, the contractor must make
enquiries about the final purpose of the project43. Moreover, French courts
consider that the pre-contractual duty of information of a party does not
release the other party from its duty of requisite care and prudence44. The
French courts sometimes even consider that the other party’s duty of using
of reasonable skill and care may actually result in an obligation to search for
information and advice45.
The obligation of information also plays a role when the parties have
concluded the contract but have not yet commenced the works. In this case,
the obligations of information and cooperation require the employer to
give all information, data and documents in its possession or control that
are needed by the contractor. The contract may list precisely the documents
that must be established and given to the contractor for that purpose.
The employer must also make all necessary administrative procedures
and formalities such as obtaining a construction permit, administrative
authorisations etc. It has also to examine carefully, at all stages, the
construction plans established by the engineer or the contractor when the
employer is not in charge of designing the project. Finally, it must properly
hand over the site to the contractor46.
As already mentioned, the obligation of loyalty implies a duty of
confidentiality. When the employer is not in charge of designing the
works, it is provided with proposals and construction plans by the would-be
contractor. The duty of loyalty prevents him from subsequently using these

42
Cour de cassation, 3e civ, 3 November 2011, no 09-13.575 (After the execution of works on a
private house, the employer considered that the contractor was responsible for defects in the works
and for not replacing wood joists on the first floor, which prevented the floor from being properly
used. The lower court had considered that the contractor had not been informed about the use of the
first floor but the Cour de cassation overruled this decision. It held that the contractor should have
enquired about the final use of the project and advised the employer on problems that may arise and
on appropriate precautions to be taken.)
43
Cour de cassation, 3e civ, 6 October 2010, no 09-68.989 (The works concerned the construction
of a warehouse. The second floor of the warehouse was supposed to be used for the storage of a heavy
quantity of documents but the contractor was not informed of this and built a floor that could not
withstand such a heavy weight. The Cour de cassation considered here again that it was the duty of the
contractor to enquire about the future use of the floor and to build it accordingly.)
44
See, for example, Cour de cassation, 1re civ, 25 March 2003, no 99-15.198 (A contract was signed
by Mr X, a professional, in the perspective of purchasing shares in a company but the purchase could
actually never happen. Mr X claimed the two companies that had advised him in the deal had breached
their duty of information. However, the Cour de cassation ruled that such duty of information did not
release the professional client from its duty of using of reasonable skill and care). Civ 1re, 30 November
2004, no 01-14.314 (A farmer bought special products to treat his plant but 10 days after the use of these
products, the fruits on which he used them decomposed. The Cour de cassation considered that as a
©Informa null - 28/11/2018 17:26

professional farmer, he had a duty of diligence and care and should have noticed that these products
were indicated to be used on cereals.)
45
P Le Tourneau, JurisClasseur Contrats – Distribution, Fasc 1820: Ingénierie et transfert de maitrise
industrielle – Conception, §90.
46
P Le Tourneau, JurisClasseur Contrats – Distribution, Fasc 1820: Ingénierie et transfert de maitrise
industrielle – Conception, §91.
 Pt 3] Good Faith in Construction Contracts Under French Law 315

plans and all the documents that were prepared by the would-be contractor
if the latter is not ultimately engaged. A confidentiality duty is sometimes
also imposed on the contractor or the engineer. Thus they undertake
to remain silent and not to reveal any information acquired during the
elaboration of the project47.

D. French law sanctions for breach of the duty of good faith

At the pre-contractual stage, parties may either negotiate on an “informal”
basis or seek to put in place a more formal negotiation structure by way of
a letter of intent, for example. When the contract is informally negotiated,
a party may be found liable in tort48 and have to pay damages to the other
party if it suddenly and brutally breaks off negotiations without reasonable
justification. In this case, that party may be required to reimburse the other
party’s fees and expenses incurred in the aborted negotiations. This is
the only acceptable sanction since there is no contract in place between
the parties. What is being sanctioned by an award of damages is not the
breakdown of the negotiations themselves but rather the abusive manner
in which the negotiations were broken off. Thus, only the losses incurred
by a party because of the abusive breakdown of the negotiations by the
other party may be repaired. As a result, French courts grant damages
that correspond only to the costs that were incurred during and for the
conduct of the negotiations. A party can recover its expenditure, including
preparatory studies, travel for negotiation meetings, reports, etc, if such
expenses were reasonably and timely made in the circumstances49. This was
recently reaffirmed by a decision of the Cour de cassation which sanctioned
the abusive breakdown of negotiations regarding a contract for the transfer
of shares50.
Thus, compensation for the loss of opportunity to conclude the contract
and the loss of profit will not be granted. No direct causal link exists between
the abusive attitude of the party which suddenly and without justification
broke-off the negotiations and the fact that no contract was concluded. Once
again, the breakdown of the negotiations per se is not sanctioned. Had the

47
P Le Tourneau and M Poumarède, “Bonne foi” in Répertoire de Droit Civil, Dalloz January 2009
(updated: October 2014), §38-39. P Le Tourneau, JurisClasseur Contrats – Distribution, Fasc 1820:
Ingénierie et transfert de maitrise industrielle – Conception, §96-100
48
Article 1382 of the French Civil Code provides: “Any act whatever of man, which causes damage
to another, obliges the one by whose fault it occurred to compensate it.” (“Tout fait quelconque de
l’homme, qui cause à autrui un dommage, oblige celui par la faute duquel il est arrivé, à le réparer.”)
Article 1383 of the French Civil Code provides: “Everyone is liable for the damage he causes not only by
©Informa null - 28/11/2018 17:26

his intentional act, but also by his negligent conduct or by his imprudence.” (“Chacun est responsable
du dommage qu’il a causé non seulement par son fait, mais encore par sa négligence ou par son
imprudence.”) (Official translations are available at http://www.legifrance.gouv.fr.)
49
Article 1382 of French Civil Code.
50
Cour de cassation, Com, 18 January 2011, no 09-14.617. (“The prejudice [caused by the abusive
breakdown of the negotiations] only includes the costs incurred for the purpose of the negotiations.”)
 316 The International Construction Law Review [2015

party coherently justified its decision to break off, no prejudice would have
been recognised, in spite of the non-conclusion of the negotiations. The
loss of opportunity to conclude the contract and the loss of profit are linked
to the absence of the conclusion of the contract only, not to the behaviour
of the party which abusively broke off the negotiations51. This was affirmed
by the famous ruling of the Cour de cassation in the Manoukian case52 and
has been confirmed several times since then53.
The position seems to be different when parties have put in place a
contractual framework for their negotiations, such as a letter of intent
(in which parties affirm their intention to negotiate in order to reach an
agreement), an “agreement of principle” (by which the parties express
their will to conclude a particular kind of contract but have not yet reached
an agreement on the material obligations) or partial agreements (in which
some obligations of the contract have been determined but others are still
missing). These kinds of “negotiation contracts” must be distinguished
from other forms of contract such as “promises to contract” which give one
of the parties the discretion to sign the final agreement at a later stage.
In the context of such “negotiation contracts”, the consequences of an
abusive breakdown may be different. Firstly, damages that will be granted
by the courts to repair the prejudice caused will be based on contractual
liability, not tortious liability54. Secondly, in this case, French courts seem
to grant damages that include the loss of chance (“perte de chance”) to
conclude the contract as the parties had formalised their intention to
find an agreement55. Under this claim a party can recover a proportion
of the anticipated benefit of the contract, representing the probability of
success56. Finally, and this is the main difference, courts may order a limited
form of specific performance in some particular cases. However, French
courts will only do so when parties have signed a partial agreement that
already contains the fundamental obligations of the final contract. If only
accessory or non-essential elements of the contract have been determined
(for example, simply the date and place of performance) but fundamental

51
M Storck, JurisClasseur Civil Code, Fasc 10: contrats et obligations – Promesse de contrat –
Introduction et notion, §6.
52
Cour de cassation, Com, 26 November 2003, no 00-10.243 and no 00-10.949 (“the fault commited
by a party when it abusively breaks off negotiations is not the cause of the other party’s prejudice resulting
in the loss of opportunity to conclude the contract and to gain revenues from it.” Therefore, the court
considered that only the costs incurred for the purpose of the negotiations and the preliminary studies
carried out constituted the prejudice and could be repaired.)
53
See for instance, Cour de cassation, 3e civ, 28 June 2006, no 04-20.040 (identical solution reached
in identical terms).
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54
M Storck, JurisClasseur Civil Code, Fasc 10: contrats et obligations – Promesse de contrat. –
Introduction et notion, §18.
55
M Storck, Ibid. See also for instance mentioned court decisions: Court of Appeal of Paris, 25e ch,
17 January 2003: Juris-Data no 2003-211449; Cass 3e civ, 16 April 1973, no 72-10.487. Cass com, 22 May
1979, no 78-10.752.
56
Paula Giliker, Pre-contractual Liability in English and French Law (Kluwer 2002) at p 130.
 Pt 3] Good Faith in Construction Contracts Under French Law 317

obligations are still to be agreed upon, French judges will not make an
order of specific performance57.
If specific performance is ordered by the court because all fundamental
obligations are deemed to have been agreed in the partial agreement,
French judges themselves may complete the said partial agreement and
determine the missing accessory or non-essential elements. The remedy of
specific performance is, however, controversial. A judge cannot force a party
to sign a contract where the parties have not agreed on the terms58. However,
a French judge may order the parties to recommence negotiations59. The
French judge may even appoint a “mandataire-négociateur” to follow the
negotiations and note his findings to the judge in a report should the
negotiations fail, although this remedy is exceptional60.
As regards the non-respect by a party of its pre-contractual obligation of
information, courts generally also consider that the defaulting party should
be held liable and pay damages to the other party. Damages will be granted
in order to repair the prejudice caused by the breach of the obligation of
information and by the resulting lack of knowledge of essential elements
by the other party. The breach of the obligation of information will even
sometimes lead to the annulment of the contract. This will only be the case
where the information that was not revealed by a party to the other before
the conclusion of the contract would have led the latter to walk away from
the deal. That kind of situation is called “dol” in French law. When courts
rule that a “dol” has occurred, they consider that the party’s actual consent
to contract with the other was vitiated. The contract should therefore be
considered null and void.
With respect to contract performance, breach of the duty of good faith
illustrated by the abusive use of certain rights and provisions included in
the contract will also result in the payment of damages to the other party.
For example, it is the case where a party terminates the contract in bad
faith with no reasonable justification. More generally, a higher amount of
damages will have to be paid by a party who had deliberately breached the
contract by acting in bad faith. In other words, if a party knew that it was in
breach of a contract but persisted with its behaviour (the opposite of acting
in good faith), it will be sanctioned more severely by the courts. However,
a party cannot be discharged from the performance of a contract that is
performed in bad faith by the other party. Judges cannot declare a contract
null and void because its performance is executed in bad faith either.
What is less clear, however, is whether French courts have the power to
prevent a contractual provision from producing effects when operated in
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57
L Gareil-Sutter, JurisClasseur Contrats – Distribution, Fasc 20: Période précontractuelle – Contenu,
§66.
58
Pierre Mousseron, RTD Com 1998 p 243 at paragraph 73.
59
Pierre Mousseron, RTD Com 1998 p 243 at paragraphs 75 to 76.
60
Pierre Mousseron, RTD Com 1998 p 243 at paragraph 76.
 318 The International Construction Law Review [2015

bad faith. This is much debated by French legal scholars. Some authors, such
as Professor Philippe Stoffel-Munck, have consistently argued that defeating
the effects of clauses operated in bad faith should not be possible61.
Professor Stoffel-Munck considers that the notion of good faith should
only be used by judges to interpret the performance of the contract and
to control the parties’ behaviour, but not to defeat the effects of clauses in
such contracts. According to this eminent jurist, the first sentence of Article
1134 of the French Civil Code cited above (“agreements lawfully entered
into have the force of law for those who have made them”) prohibits judges
from preventing any clauses of agreements entered into by parties from
having effects. However, before 2007, courts seemed to allow the paralysis
of the effects of provisions operated in bad faith. The clauses were then only
considered as having no effect when operated in bad faith. They were not
declared null and could thus be operated again in the future, in good faith.
Applying this in the context of construction contracts, for example, this
would mean that the effects of a termination provision suddenly operated in
bad faith by an employer who had prevented the contractor from correctly
performing the contract would probably be defeated.
Yet other decisions seemed to come closer to Professor Philippe Stoffel-
Munck’s views. Following a decision of the Cour de cassation in 2007, it does
not appear possible for French courts to defeat the effects of contractual
provisions operated in bad faith. Indeed, the Cour de cassation stated in
this decision that: “although the rule according to which contracts must
be executed in good faith allows a court to sanction an abusive use of a
contractual prerogative, it does not authorise the court to undermine the
very substance of the rights and obligations legally contracted by the
parties”62. This seems to enshrine Professor Stoffel-Munck’s views on
the matter. According to this interpretation, the effects of contractual
provisions, even if operated in bad faith by a party, could thus not be
defeated by French courts. Professor Stoffel-Munck confirmed that this is
the only valid solution in his eyes, as a different ruling would have brought
too much legal uncertainty for contractual parties and also because the
duty of good faith is not aimed at sanctioning contractual obligations but
only the behaviour adopted to perform the obligation63. These views, and
the 2007 ruling from the Cour de cassation, would therefore apply to all
kinds of contracts, including construction contracts.

61
P Stoffel-Munck, “L’abus dans le contrat: essai d’une théorie”, LGDJ 2000.
62
Cour de cassation, Com 10 July 2007, no 06-14.768 (Two individuals sold their shares in a company
to a third person. The purchase agreement contained a clause relating to the sellers’ liability guarantee.
©Informa null - 28/11/2018 17:26

When financial problems appeared after the sale, the buyers claimed that the sellers should pay a certain
amount of money to resolve the financial difficulties of the company. The lower court rejected this claim
finding that the buyer could not ignore the company’s financial difficulties and was thus acting in bad
faith. The Cour de cassation overruled this decision, declaring that the obligation of good faith does not
allow judges to modify the content of a contract.)
63
P Stoffel-Munck, “Créancier déloyal dans l’exécution n’est pas moins créancier”, D 2007, p 839.
 Pt 3] Good Faith in Construction Contracts Under French Law 319

However, Professor Stoffel-Munck himself considers that this decision

may not have definitively put an end to the doctrinal and jurisprudential
debate on this question. It may actually depend on the nature of the
clause that is operated in bad faith. Professor Stoffel-Munck believes that
clauses such as termination clauses, forfeit clauses or any clauses that allow
unilateral modifications of the contract may still see their effects defeated
by courts when operated in bad faith64. Another author, whose views are
found compelling by Professor Stoffel-Munck, considers that courts actually
only defeat the effects of clauses operated in bad faith where this bad faith
is illustrated by an incoherent attitude65. A party which behaved in one way
and then suddenly changed its behaviour by operating a contractual clause
differently, showing a lack of coherence, could therefore still be sanctioned
by French courts and see the effects of the operated clause paralysed. But
only future case law from the French Supreme court will actually bring an
answer to this question.

2. GOOD FAITH UNDER ENGLISH LAW

The purpose of this section is not to examine in detail the nature and scope
of the obligation of a duty of good faith under English law but rather to
outline briefly the current state of English law on this subject and then to
draw some comparative observations from the approaches adopted on both
sides of the Channel66.

A. A brief outline of the current position under English law

There is no general doctrine or universal duty of good faith in English
contract law (other than in specific areas such as insurance and partnership
law). English courts have always been reluctant to apply such a general
principle into commercial contracts. The grounds for this hostility include
the preferred incremental case law approach of English law, and the
conviction that a party is free to pursue its own interest67. Moreover, the
main concern under English law is that implying a duty of good faith would
create too much uncertainty by implying obligations that are potentially

64
P Stoffel-Munck, “Créancier déloyal dans l’exécution n’est pas moins créancier”, D 2007, p 839.
65
D Houtcieff, “Le principe de cohérence en matière contractuelle”, préf H Muir-Watt, PUAM 2001, no 874.
©Informa null - 28/11/2018 17:26

66
For two excellent analyses of good faith in English law, see S Jackson, “Good Faith Revisited”,
Construction Law Journal, 2014, 30(8), 379–389 and see also J van Duhne, “On a clear day, you can see the
continent – the shrouded acceptance of good faith as a general rule of contract law on the British Isles”,
Construction Law Journal 2015, 31(1), 3–25.
67
M N Michael, “The Good Faith Movement: Swimming Against the Tide”, The European, Middle
Eastern and African Arbitration Review, 2015.
 320 The International Construction Law Review [2015

vague and subjective68. According to many authors, this would undermine

the goal of contractual certainty, on which English law places great weight69.
However, English law has known some evolution toward the recognition
of some sort of duty of good faith. English law has developed what is often
called “piecemeal solutions”70 such as the doctrine of estoppel – that
prevents a party from denying or alleging a certain fact owing to that party’s
previous conduct in order to prevent an inequitable result – or the use of
implied terms – which are terms that a court will assume are intended to be
included in a contract, even though they are not expressly stated, based on
the method of purposive and contextual interpretation71 – and a range of
situation-specific principles that often lead to a very similar outcome as the
application of a general obligation of good faith72.
Furthermore, the prevalence of long term contracts and “relational”
contracts (such as alliancing or partnering contracts) relying on frequent
communication and cooperation to operate effectively and the growing
use of express duties of good faith in English law contracts seem bound to
attract further judicial interpretation. Concepts of good faith influence the
way that contracts are interpreted. Although there is no generally applicable
definition of “good faith” under English law, there are different examples
of interpretations of the notion including: fidelity to an agreed common
purpose, acting within the spirit of the contract, observing reasonable
commercial standards of fair dealing and acting consistently with the
justified expectations of the parties.
A relatively recent case has seemed to recognise a duty to perform
contracts in good faith. In the Queen’s Bench division of the English High
Court April 2013 decision in Yam Seng 73, Leggatt J applied the test for
implying terms based on what the contract, read as a whole against the
relevant background, would reasonably be understood to mean (is the term
so obvious that it went without saying and was it necessary to give business
efficacy to the contract?). Leggatt J considered that modern case law on
construction of contracts recognises that contracts are made against a
background of shared understandings, encompassing matters of fact known

68
R Cumbley, P Church, “Good faith and commercial contracts: playing fair”, Practical Law, 26 March
2015.
69
See for instance, S Jackson “Good faith revisited”, Construction Law Journal, 2014, 30(8), 379–389.
70
In Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd, for example, Bingham LJ, when
comparing civil law systems’ acceptance of an over-riding obligation to “play fair”, explained that
English law, on the other hand, has committed itself to no such general principle, developing piecemeal
solutions to demonstrated problems of unfairness. [1989] QB 433 at 439; [1988] 1 All ER 348.
71
In the field of construction law good examples of this are the implication of terms concerning co-
operation and prevention, namely terms that neither party shall do anything to hinder the other from
©Informa null - 28/11/2018 17:26

performing the contract or to do everything that may be necessary to enable the other to perform their
obligations. See, for example, Hudson’s Building and Engineering Contracts 12th Edition, paragraph 3-136.
72
J van Duhne, “On a clear day, you can see the continent – the shrouded acceptance of good faith as
a general rule of contract law on the British Isles”, Construction Law Journal 2015, 31(1), 3–25.
73
Yam Seng Pte Ltd v International Trade Corp. Ltd [2013] EWHC 111 (QB); [2013] BLR 147; [2013]
1 Lloyd's Rep 526; [2013] 1 All ER (Comm) 1321; (2013) 146 ConLR 39.
 Pt 3] Good Faith in Construction Contracts Under French Law 321

by the parties and also shared values and norms of behaviour, including an
expectation of honesty. Based on that analysis, Leggatt J distilled the good
faith principle into specific implied obligations which were, in that case, a
duty not to give false information and a duty not to undercut free prices.
However, the extent of this decision’s import should not be overestimated.
Leggatt J did not think English law was ready to recognise a duty of good
faith as a duty implied by law into all commercial contracts. He only thought
that a duty of good faith could be implied into a contract as a term based on
the presumed intention of the parties. The contract at issue was skeletal and
did not set out the parties’ obligations in detail; it was apparently drafted
by the parties themselves, with no legal input. Furthermore, the contract
was a distribution agreement, which the judge described as a long-term
“relational” contract involving a high degree of cooperation, consultation
and predictable performance based on mutual trust and confidence.
Leggatt J noted that these duties are generally implicit rather than expressly
set out in the contract and are necessary to give business efficacy to the
contract. This cannot be extended to all sorts of commercial contracts.
Moreover, subsequent decisions have shown that the existence of a duty
of good faith under English law is far from established. For example, in the
Mid Essex decision74, the Court of Appeal did not apply the reasoning of
Leggatt J. This case showed, on the contrary, that even where the contract
contains an express clause imposing an obligation of good faith on the
parties, the scope of this obligation may be reduced to very specific duties
and no general obligation of good faith may be widely applied75. Only future
English case law will therefore help to determine whether English law will
progressively recognise such obligation.
Thus the most relevant criterion to apply to determine whether a
duty of good faith applies to the obligations contained in a contract is
probably to make a distinction between contracts which take place over
a short period and require no on-going cooperation (for example, sales
contracts) and “relational” contracts which take place over a lengthy
period and require the parties to cooperate and work together to attain
the common objective of the contracts76. In the latter case, parties are

74
Compass Group UK and Ireland Ltd (t/a Medirest) v Mid Essex Hospital Services NHS Trust [2012] EWHC
781 (QB); [2012] 2 All ER (Comm) 300 overturned on appeal: (CA) [2013] EWCA Civ 200; [2013] BLR
265; [2013] CILL 3342.
75
See also, TSG Building Services plc v South Anglia Housing Ltd [2013] EWHC 1151 (TCC); [2013] BLR
484 which concerned a partnering agreement. Mr Justice Akenhead held that the express provision that
the parties would “work together and individually in the spirit of trust fairness and mutual co-operation
for the benefit of the Term Programme” did not require the parties to act in good faith or the act
©Informa null - 28/11/2018 17:26

reasonably when terminating the contract in accordance with the termination provisions and further
that there was no implied term of good faith beyond the express obligation set out.
76
See, for example, Bristol Groundschool Ltd v Intelligent Data Capture Ltd [2014] EWHC 2145 (Ch)
judgment of Richard Spearman QC sitting as a deputy judge in the Chancery Division in which he
held that the particular contract, a contract relating to the provision of computer based pilot training
materials, was a “relational” contract which contained an implied duty of good faith, applying Yam Seng.
 322 The International Construction Law Review [2015

more likely to be submitted to an enhanced obligation of good faith and

cooperation by English courts77.

B. Some final comparative observations

All legal systems are the product of their respective legal traditions and
their underpinning legal theory. The difference in the approaches to the
application of a good faith norm at contract creation and performance on
both sides of the Channel is a good example of this truism. Some have
theorised that the focus in French law is on the relationship between the
parties, in contrast with the primacy under English law of the commercial
bargain78. Others have tended more towards an economic analysis of the
law in this area, placing emphasis on the perceived short-termist market
individualism and hard-bargaining tradition of English law, with its corollary
requirement for the market stability which legal certainty fosters79.
Before attempting to distil a number of comparative elements from both
sides of the Channel, it is worthwhile recalling the following important points.
As we have seen, French law embraces an overarching principle that the parties
negotiate and perform their obligations in good faith. Absent in English law,
however, is the recognition of such a general guiding principle of good faith
(and, notwithstanding the decision in Yam Seng and developments since, this
remains the position today). This said, English law is replete with rules and
norms that contain elements of good faith. These include legal principles
such as estoppels, misrepresentation and the torts of deceit and duress.
Moreover, the method available to English judges in their interpretation of
contracts (which takes into account the purpose and context of the contract,
a technique that is close in its effects to that adopted by French judges80) leads
to similar outcomes to the application of a general principle of good faith.
It is also important to recall that in relation to contract performance
the duty of good faith under French law merely directs a court or tribunal
towards interpreting contracts within the commercial context in which they
were performed. It has not been applied by French courts as creating a
separate duty of fairness outside of the contract which can be independently
breached, contrary to lingering misconceptions.
Bearing the above in mind, a number of comparative elements emerge:
• both systems recognise the importance of freedom of contract and
both are concerned with finding a balance between the value to be
attached to commercial certainty and contractual morality.

77
S Jackson “Good faith revisited”, Construction Law Journal 2014, 30(8), 379–389.
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78
Paula Giliker, Pre-contractual Liability in English and French Law (Kluwer 2002) pp 4 to 5.
79
See, for example, E Mackaay, V Leblanc, “The Law and Economics of Good Faith in the Civil Law
of Contract”, prepared for the 2003 Conference of the European Association of Law and Economics
held in Nancy, 18–20 September 2003.
80
J van Duhne, “On a clear day, you can see the continent – the shrouded acceptance of good faith as
a general rule of contract law on the British Isles”, Construction Law Journal 2015, 31(1), 3-25.
 Pt 3] Good Faith in Construction Contracts Under French Law 323

• both systems work from an assumption that parties have agreed

to conduct themselves fairly towards each other in support of
their mutual bargain; they are thus assumed and expected to act
in a manner consistent with honesty and to respect the reasonable
expectations created by them.
• while good faith in both systems prohibits opportunistic behaviour
that takes advantage in a way not contemplated by the bargain, this
does not mean that a party must subordinate its own interests to
those of the other contracting party, always provided honesty and
fair dealing are respected.
• although good faith has a core meaning of honesty in both systems,
a lack of good faith does not necessarily entail bad faith. Not all bad
faith involves dishonesty. Bad faith conduct could include behaviour
perceived to be commercially unacceptable or unconscionable but
which is not actually dishonest so a failure to act in good faith does
not necessarily require fraud or other dishonesty.
• In both systems, a review of the case law and legal writings demonstrates
that the content of a duty of good faith is heavily conditioned by its
context, and is fact specific. It is not unlikely that in the overwhelming
majority of situations encountered by courts on both sides of the
Channel, very similar outcomes would have been reached by the
application of the good faith duty in France and corresponding legal
devices (implied terms, estoppels, etc) in England.
It is in relation to obligations of pre-contract disclosure and candour that
the real divergence lies between the approaches adopted in both systems.
The issue of certainty in commercial relations is at the core of the rationale
underlying the legal position on pre-contractual negotiations. French law, it
has been stated “is far more willing to contemplate contractual obligations
at an early stage and less concerned with the demands for security and
stability in the market place, which influence its English counterpart.”81.
This obligation may require general pre-contract disclosure to a degree
which demands that the bargaining power of the parties takes place on
an equal footing (for example, symmetry of information). The legitimacy
and acceptance of such a broader imposed norm depends upon the
underpinning theoretical framework. This goes a long way to explaining
why English law has refused to embrace this sort of pre-contractual duty of
good faith. The English law position was most clearly encapsulated by Lord
Ackner in Walford v Miles 82: “the concept of a duty to carry on negotiations
in good faith is inherently repugnant to the adversarial position of the
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parties when involved in negotiations”. The absence, however, of a duty of

good faith for pre-contractual dealings would not leave one party entirely

81
Paula Giliker, Pre-contractual Liability in English and French Law (Kluwer 2002) at p 45.
82
Walford v Miles [1992] 2 AC 128; [1992] 2 WLR 174; [1992] 1 All ER 453.
 324 The International Construction Law Review [2015

unprotected nor would it enable the other party to flout all considerations
of decency or fair play: false statements made during negotiations may, for
example, be actionable in misrepresentation under English law.
The construction industry is dynamic. Norms, principles, rules (whatever
label is attributed) that go to honesty and fair dealings between employers,
contractors, subcontractors, engineers and other industry players are
not static. On both sides of the Channel, these have evolved and been
developed by the courts, balancing commercial certainty with the parties’
reasonable expectations. Notwithstanding differences of both approach
and application, the practical outcomes in jurisprudence from both systems
seem to indicate that divergences are often more apparent than real. With
the advent and development of collaborative contracting methods (such
as alliance or partnering contracts) which incorporate express good faith
clauses, it seems likely that, at least in England, the role and application of
good faith concepts will remain very much on the radar.
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