What is good faith and fair dealing? Is this a term that is used out of habit that doesn’t carry much weight, or can and will it be enforced by the courts when violated?
According to the Louisiana Revised Statutes definitions 26:802 (6), “good faith” means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. Another definition of good faith is “honesty”; a sincere intention to deal fairly with others. It is not just important to be fair, but the sincerity behind the intention is key. In every contract there is an implied duty of good faith and fair dealing. This means that in every contract it is suggested, but not directly expressed that the persons in the contract will deal fairly and honestly with one another. Good faith is a term that has a sincere motive without any desire to defraud others.
Fair dealing goes hand in hand with good faith when under contract. Fair dealing is not just honesty, fair dealing requires that a party cannot act contrary to the spirit of the contract even if you give the opposing party notice that you intend to do so. The term “good faith” comes from the translation of the Latin term bona fide. In the court system these two terms are used interchangeably. When the court system is determining if a party has breached a contract they have to look to see if the parties have upheld the duty of good faith and fair dealing. This means the parties must not do the following: