Introduction

In simple language Good Faith is honest intent to act without taking an unfair advantage
over another person or to fulfill a promise to act, even when some legal technicality is not
fulfilled. The term is applied to all kinds of transactions. But in legal terms Good Faith is
an abstract and comprehensive term that encompasses a sincere belief or motive without any
malice or the desire to defraud others.
Utmost good faith is usually divided into 3 components: representations, concealments,
and warranties and failure of fulfillment of these three tools direct the situation to the
practice of Bad Faith.
It is an important part of USA law and followed in most country commercial laws. The High
Court ruled that parties to commercial contracts could owe each other an implied duty to act
in good faith, even if the contract didn't expressly require them to do so (2003). Previously,
parties to a commercial contract only had to act in good faith if the contract specifically
required them to do so. The relevant background to a commercial contract included not just
the facts but also the parties shared values and norms of behavior based on Industry law
(2006) These could include a shared expectation that each would act in good faith, for
example, that each would act honestly and avoid improper or unacceptable behavior falling
short of actual dishonesty; and behave consistently with the values and norms implicitly
underpinning the contract. The dominance in the world economy is evolved from the capacity
and capability to up hold traditions with unique blend of modernization. South Asian
countries are mostly developing countries with many developing industries. In this study,
emphasis had been given to identify different practices taken by companies. The main
objectives of the study are to understand the existing commercial law practices by local
companies in sub-continental countries and to find out ways to apply good faith practices into
organizations to gain more competitive advantage in global business environment (Arthur,
1994; Huselid, 1995; Ichniowski et al. 1997; Katou and Budhwar, 2007; Miah and Bird
2007).

Good Faith in Civil Law and Common Law

At first lets talk about good faith Under English law; there is no generally applicable
definition of "good faith" in performing contracts. It is clear from the authorities that the
content of a duty of good faith is heavily conditioned by its context. There may be a core
meaning of honesty but, put into context, the meaning of the phrase will call for further
elaboration. Examples of different interpretations by the courts include: faithfulness 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. In a recent case, the Court of Appeal found an express obligation to co-operate in
good faith meant the parties would work together honestly endeavoring to achieve the stated
purposes expressly linked to the duty.
Finally, cases seem to suggest that lack of good faith entails bad faith. Whilst good faith has a
core meaning of honesty, not all bad faith involves dishonesty. Bad faith conduct could
include behavior which is seen as commercially unacceptable, improper or unconscionable,
but which is not actually dishonest. So, a failure to act in good faith (or not to act in bad faith)
does not necessarily require fraud or other dishonesty.
When drafting an express obligation to act in good faith, think about what this involves in the
context of the contract. The drafting should be clear and precise, with no room for different
interpretations - consider including a non-exclusive list of examples of "good faith" behavior.
In common law, good faith, as a general principle, is accepted by the law of the United
States, whereas English law has refused to develop the principle as a general one. As is
widely known, English law has previously declined to adopt a general principle of good faith.
It has been said by a leading author that, the predictability of the legal outcome of a case is
more important than absolute justice. A civil law author, Hein Ktz, comments on this
approach: The English do not seem to appreciate that the technique of going forward
cautiously from this case or that case, as justice in each case requires, is equally possible
where the judge has to work on the basis of a loosely textured statutory formula, such as good
faith principle. Some of them believe that such form would be positively dangerous.

The tendency of a legal system to embrace good faith or explicitly require it

In a narrow range of particular situations is likely to be related to a number of historical,
cultural and institutional factors. As has been shown hitherto, the concept of good faith is not
static. For example, the notion of good faith has evolved recently in countries such as Canada
and Australia, which having the past ended to follow the distrustful English lead with regards
to good faith in the development of their contract law Another example is the mixed system
of Scots law in which good faith appears to be increasing its influence.

In civil law countries good faith is accepted as a general principle of contract law. However,
it is not always understood in the same way. Good faith has allowed continental judges to
create new solutions without invading the area of the legislator. The German example where
judges have overcome obstacles and legal gaps deriving the decisions under section 242 BGB
is conspicuous, as will be seen.

Sometimes contractual good faith reaches, in continental law, such levels of amplitude that,
for example, in Italy its creative role has been recognized. Two leading scholars testify so.
Galgano asserts. The principle of good faith allows identifying other prohibitions and duties
besides those foreseen by the law.
Massimo Bianca states that, beyond the role of integration that good faith plays, the principle
prevails even over the determinations and clauses of the contract. The Italian courts have
embraced this view as well: a recent verdict by the Corte di Cassazione has affirmed the
criterion that good faith is an instrument in the judges hands to control and even to modify
and integrate the agreement.

Good Faith in Civil Law:

Civil Law, in contrast, is codified. Countries with civil law systems have comprehensive,
continuously updated legal codes that specify all matters capable of being brought before a
court, the applicable procedure, and the appropriate punishment for each offense. Such codes
distinguish between different categories of law: substantive law establishes which acts are
subject to criminal or civil prosecution, procedural law establishes how to determine whether
a particular action constitutes a criminal act, and penal law establishes the appropriate
penalty. In a civil law system, the judges role is to establish the facts of the case and to apply
the provisions of the applicable code. Though the judge often brings the formal charges,

investigates the matter, and decides on the case, he or she works within a framework
established by a comprehensive, codified set of laws. The judges decision is consequently
less crucial in shaping civil law than the decisions of legislators and legal scholars who draft
and interpret the codes.
The twentieth century, specifically in the 1930s, scholars saw good faith as a tool in the
judges hands for adjusting the contract to new and unforeseen events in opposition to the
inflexibility of articles 6 and 1134 line 1 of the Civil Code.To the question of whether such
flexibility of the contract could bring more trouble than benefits, the scholars answered that
they rather feared a rvolte des faits contre le Code Ripert in LOrdre conomique et la
Libert Contractuelle considered that the regulation of the contract had passed from flexible
to semi rigid. In his view, the legislator had supplanted the parties in the regulation of
contractual obligations under the pretext of law and order. To avoid the limitation of
contractual freedom, he advocated for a tool in the judges hands which allows shaping the
contract according to the circumstances. Ripert stated that it is difficult to find a technical
way for that, but he imagined several ones in the theory of imprvision, which is a theory that
had been applied on numerous occasions by the Counseil dEtat and other administrative
courts allowing the adjustment of administrative contracts due to the public interest
involved.At the end of the fifties and during the sixties good faith started to be accepted by
courts.

Good Faith in Common Law:

Common law is generally unmodified. This means that there is no comprehensive
compilation of legal rules and statutes. While common law does rely on some scattered
statutes, which are legislative decisions, it is largely based on precedent, meaning the judicial
decisions that have already been made in similar cases. These precedents are maintained over
time through the records of the courts as well as historically documented in collections of
case law known as yearbooks and reports. The precedents to be applied in the decision of
each new case are determined by the presiding judge. As a result, judges have an enormous
role in shaping American and British law. Common law functions as an adversarial system, a
contest between two opposing parties before a judge who moderates. A jury of ordinary
people without legal training decides on the facts of the case. The judge then determines the
appropriate sentence based on the jurys verdict.

Practice of Good Faith in Countries other than Bangladesh

Many Law have not yet recognized a general duty of Good Faith on contracting parties.
ThoseLaw prefers and incremental and piecemeal approach in solving conflicts. For example,
Thomas Henry Bingham, Baron Bingham of Cornhill (13 October 1933 11 September
2010) stated in the case of Interfoto Picture Library Ltd v Stiletto Visual Programmes
Ltd [1989], In many civil law systems, and perhaps in most legal systems outside the
common law world, the law of obligations recognizes and enforces an overriding principle
that in making and carrying out contracts parties should act in good faith. This does not
simply mean that they should not deceive each other, a principle which any legal system must
recognise; its effect is perhaps most aptly conveyed by such metaphorical colloquialisms as
'playing fair', 'coming clean' or 'putting one's cards face upwards on the table.' It is in
essence a principle of fair open dealing English law has, characteristically, committed
itself to no such overriding principle but has developed piecemeal solutions in response to
demonstrated problems of unfairness. Sir Bingham was a British judge and jurist and served
in the highest judicial offices of the United Kingdom as Master of the Rolls, Lord Chief
Justice and as Senior Law Lord.
This rigid position about Good Faith differs from the position of this concept from many
other countries including France, Germany, United States, Canada and Australia,
which, to some extent or another, recognize some form of overriding principle that, in
agreeing and performing contracts, the parties should act in good faith.

Supreme Court of Canada imposed general duty of Good Faith in contract through the case of
Bhasin v. Hrynew and the court acknowledged that Canadian contract Law comes with a duty
of Good Faith that requires all concerned parties to perform their contractual obligations
honestly. Mr. Justice Thomas Cromwell, a Canadian jurist and current Puisne Justice on
the Supreme Court of Canada supported this decision by stating, Finding that there is a duty
to perform contracts honestly will make the law more certain, more just and more in tune
with reasonable commercial expectations.

Practice of Good Faith in Bangladesh

To analyze the practice of Good faith in Bangladesh we choose insurance sector at first place.
To know the reason firstly we have to know what actually insurance is. A contract of
Insurance is a contract between two parties whereby one party, called the Insurer, agrees to
pay the other party a certain sum of money on the happening of a specifies contingency, or
agrees to indemnify the other from losses arising from certain specified events. The other
party to the contract, called the Insured or Assured pays an agreed sum of money, called the
Premium, as consideration. One of the essentials characteristics of a Contract of Insurance is
Good Faith. The main objective of every insurance contract is to give financial security and
protection to the insured from any future uncertainties. Insured must never try to misuse this
financial cover. This implies that it is lawful for any insurance contract to practice Good Faith
from the perspective of both insurer and insured. And it is the duty of the Insured person to
disclose all material facts concerning the subject matter of the insurance. This discloser
should be full and fair, and if in case of misinterpretation or fraud, the insurer will have the
option of avoiding the contract.

Analysis of Survey findings

To get an idea about the perception of insurer and insured about the existence of Good Faith
in our national law and the current level of practice of Good Faith and the importance of
implementation of Good Faith more prominently in a contract from both side of insurer and
insured person we did a survey on some selective questions with the help of employees in
who work in insurance sector. And the result of this analysis is given below:
1. According to you what is Good Faith?

In our first question we wanted to know that how many people know about the actual
meaning of Good Faith and we found that a good number of people (46%) know the actual
meaning of Good Faith. And about 31% knows Good Faith to be Customizing your service
according to customers desire and about 23% knows Good Faith as Attracting customers
with Good reputation. Hence about 51% people do not know the actual meaning of Good
Faith.

2. Does Good Faith exist in our commercial Law?

Then we wanted to know that how many people are aware of the existence of Good Faith in
our Commercial Law. According to our analysis we found that 61% of our target people are
aware about the existence of Good Faith in our Commercial Law and 31% does not have clue
about Good Faith being a part of our Commercial Law. From this analysis we can see that
even as majority of people are not aware of the actual meaning of Good Faith they are aware
of Good Faith being a part of our Commercial Law as they are working in an Industry related
to Good Faith.

3. How prominently Good Faith is stated in our National Law?

How prominently Good Faith is stated in our Commercial Law? this question was asked to
know about how many people are aware about the importance of Good Faith in our
Commercial Law. And only 8% believes that Good Faith holds a strong position in our
Commercial Law. About 38% supports a moderate position and according to 31% it holds a
weak position. Ironically 23% believes that Good Faith is not a part of our Commercial Law.
4. Is the current concept of Good Faith in the sense of cooperation a desirable
outcome?

When we wanted to about the desirable outcome of the existence of the concept of Good
Faith in the sense of cooperation, 31% believes that the outcome is appreciable whereas 69%
believes in an undesirable outcome. This situation states that in spite of the presence Good
Faith in Commercial Law, the practice is rare.
5. Do you think the concept of Good Faith is likely to change over time?

In our next question we wanted to know if the participants want the concept of Good Faith is
likely to change over time. Surprisingly majority (54%) of our participants dont know that
weather it should change or not and about 38% thinks it should. Only 8% think that it should
go on as it is.

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6. Should Government impose restrictions and increase inspections to make sure

that every company practices Good Faith?

Majority (77%) people think that Government should impose restrictions and increase
inspections to make sure that every company practices Good Faith but 23% disagreed. This
implies that most people support an honest practice of business whereas there are people who
are still looking for loopholes.

7. Do you have an insurance account with the company you are working for or any
other?

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We wanted to know about the acceptance of insurance, not only as an insurer but also as an
insured person, and thus we asked if they are holding any insurance contract for their own
purpose with their own or any others. We found that 54% is holding account with their own
company, and about 23% do not hold any contract. But 23% holds one with other companies.
It implies that a huge number believe in insurance contract on their own company but still a
great number prefer other companys policy over their own.
8. If you answered anything other than Yes then please state the reason

In the previous question 23% stated that they are holding an insurance contract with other
company but their own and as reasons behind this act 29% stated that other companies
offered more attractive features than their own and 14% believed that their own company will
not be able to practice a Good Faith when it comes to claiming.

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9. If you have an Insurance Contract then did any situation came up when you had
to claim for remedy, and how was the response toward your appeal from the
company.

When it came to claiming for remedy, maximum participants, about 77% expects the
insurance companies to practice good faith. Whereas about 15% people who actually claimed
for remedy ended up not getting a proper response and 8% had positive response.
10. If your application was rejected then do you think the company practiced Good
Faith?

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When we wanted to know if the companies who rejected the participants application
practiced Good Faith, about 15% thought that the company did practice Good Faith even
though their application got rejected whereas majority meaning 46% thought the company
did not. And the 31% percent of people who have not yet claimed for remedy expects a
proper response and 8% thinks a company should abide by Good Faith no matter what the
situation is.

Practice of Bad Faith in Insurance sector by the insurer:

Though insurance policy maker are morally and lawfully bound to practice Good Faith still
there are many activities going on which leads the situation toward the practice of Bad Faith
Instead of Good Faith and these are:

Confusing Customers with Insurance-Industry and Legal Speak:

The truth is, most average consumers are not well-versed in legal terminology and have a
very basic understanding of their own insurance policies. So policy makers use such plenty of
ways to confuse policyholders by using legal terms rather than plain English and avoid
fair compensation. To avoid this situation many states in the U.S. have enacted laws that
require insurance policy contracts to be communicated in "plain English," and it is to be
implemented to all other countries.

Advertising with misrepresentation of information:

Insurance companies sometimes design advertising with misrepresentation information or

with half-true information. They do not disclose all the relevant material information
regarding what the policy covers and what it does not. Their advertisements often include
incorrect information regarding the cost of the policy so that they seem more attractive to the
potential policyholders. They often advertise themselves as the best in the market by making
false statement about the competitors. They misrepresent the competitors policies to gain
competitive advantage. When a company releases such advertisement they engage in
unethical practices.

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Hiding the policy limitations:

Insurance companies have a duty to disclose all the information regarding the insurance
policy to their policyholders otherwise it will be a violation of the duty of good faith and fair
dealing. The insurer has the duty to disclose all applicable benefits and costs. They should
clearly inform the insured about the situations under which the insurance benefit will not be
paid. If the insurance company fails to do so it will then be a case of fraudulent
misrepresentation. The insured will be entering into the contract without free consent because
he/she was unaware of some of the facts. So this can be considered as example of bad faith
practice in insurance sector.

Changing the Policy:

The insurance companies sometimes change the terms of the insurance policy without
informing the policyholders. Later, when the insured files a claim they deny it on the basis of
the newly incorporated terms and conditions. This is a clear example of practicing bad faith.

Practice of Bad faith by insured:

There are lots of cases where insurer practices Bad faith while dealing with a customer but
also a huge number of facts where insured person do unethical things to get greater benefit
by:

Misrepresentation of Facts:

One of the significant problems that have seemed to outbreak the insurance industry is
misrepresentation of information by the insured person about the facts related to the
insurance policy. The misrepresentation may be either oral or written and is the basis of many
of the legal problems the industry has encountered.

Although in most cases

misrepresentations appear to happen unintentionally -- the misrepresenting agents believing

that they are being truthful -- the agent's ignorance is not a defense against liability arising
out of this unintentional misrepresentation. The existing laws that hold agents responsible for
misrepresentation are generally based on the premise that agents have an ethical duty to know
what they are selling and to present policies in a truthful manner.

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Recommendation:

The most important step toward a well-practiced industry with Good faith is to inform
both party of any contract about the importance of Good faith and educate them
properly about this, that how it should function and positive outcomes of this practice.

Explanation about all coverage and providing examples to policyholders by using

plain English rather than legal terms so that the policyholder has a complete
understanding of the insurance contract is must.

Personal awareness of policyholder is a must. Policyholders should always read the

small print. The policyholders often fail to read the documents properly and only
realize something is not covered when they file a claim.

One party should inform another before making any kind of changes to the clause of
agreement and should state all the terms clearly to the paper. No misrepresentation, no
half true information should be part of any agreement.

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