Another Approach - Sir Anthony Mason, Cambridge Lectures, 1993 - The concept of good faith includes the following elements: - (1) An obligation on the parties to co-operate in achieving the contractual objects (loyalty to the promise itself). - (2) Compliance with honest standards of conduct. - (3) Compliance with standards of conduct that are reasonable having regard to the interests of the parties” - McDougall : cooperation is an incident of the duty of good faith; “Thus, if a contractual duty of good faith is to be specified as an express term, it is necessary that very careful attention be given to specifying all the incidents and applications of that duty. In particular, bearing in mind what I have said as to the relationship between the duty of co-operation and the duty of good faith (with the former being subsumed into the latter), it is desirable that any specific requirement of co-operation (including, for example, that a party use “ best endeavours” or “reasonable endeavours” to bring about a desired or necessary state of affairs within which the contract is to operate) be specified” McDougall, R, The Implied Duty of Good Faith in Australian Contract Law, - Documents/mcdougall_2006.02.21.pdf - Vodafone Pacific v Mobile Innovations  NSWCA 15 : - Vodafone had the discretion under agreement to determine target levels of subscribers - Vodafone wanted profitable subscribers to its mobile network, whereas mobile innovations who was a distributor was financially incentivised to get as many subscribers as it could whether it was profitable or not. - Because of this tension between two parties, Vodafone set mobile innovation target levels at nil. Because they were paid according to whether or not it achieved its targets , Vodafone was stopping it from getting any subscribers, set the target level at nil. - Issue: could they be prevented from doing so through an interpretation of the contract or alternatively through the implication of terms to cooperate or to perform in good faith and reasonably. - The contract itself contained obligations on parties to use best endeavours to agree on business plan for the quarter; But there was no flexibility for mobile innovations to dispute the target levels set for it. - Disagreement between Trial judge and Court of Appeal as to source of obligation to act in good faith - On the obligation of good faith: Einstein J (1st instance) found that it arose through interpretation of the agency agreement. [reasonable interpretation as agency agreements are fiduciary in nature i.e. give rise to fiduciary obligations; relationships of good faith, apply higher obligation between parties i.e. not in position of conflict of interest or make any secret commissions/profit during performance of contract - The Court of Appeal (Giles JA) preferred the implication of a term of good faith through law.
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