Good Faith Performance in Employment Contracts

Traditional principles of contract law are ebbing before a flood tide bearing a more radicalised idea of the contract of employment. Some may identify in this innovation a reaction to the tradition of free market individualism expressed in the ideas of sanctity of contract, the search for agreement and the maxim caveat emptor. Parties to a contract may now be prevented from the pursuit of their selfish interests notwithstanding express terms of a contract which ostensibly appear to justify this. Express agreement may yield to obligations which are imposed by law. Amongst these significant developments is the importation of a duty binding each party to the employment contract to act in good faith,1 a duty which appears to be very different from the long recognised duty of the employee to serve faithfully.2 At present the precise nature of this new duty is elusive. Nevertheless, its importation poses difficult questions about how far the re-alignment of the employment relationship might extend. The authorities appear to establish the concept of an actionable abuse of a contractual right notwithstanding that the relevant conduct ostensibly falls within the express power conferred. But this only poses complex questions. Against what standard is such abuse to be measured? Is the good faith obligation merely a device to allow the court to enforce the contemplation of the parties at the time of contract? Is the proper focus the spirit rather than the letter of the bargain, thus departing from orthodox canons of construction? This note examines some recent decisions which have placed some reliance on the idea of good faith performance