Is there an implied term requiring the parties to act in good faith?
There are no clear answers to this question under Australian case law. The High Court has yet to endorse the implication of a term of good faith into a commercial agreement.2 However, lower courts have endorsed the implication of a term of good faith, but such a term has been implied in some cases as a matter of fact and in others as a matter of law. Implication of the term in law has been on the basis that such a term will ordinarily be implied in some, or perhaps all, commercial agreements as a ‘legal incident of the relationship’.3 The result of implying the term in law is that the term is implied into all contracts belonging to that class, although the express terms of a particular contract can exclude it. In contrast, the Victorian Court of Appeal seems to hold a preference for such a term to be implied, if at all, in fact rather than in law, meaning that the implied term of good faith is implied on an ad-hoc basis to give effect to the presumed intention of the parties. Those who
