Evolution and Limitations of Australian Contract Law

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I Introduction

In the commercial sphere, contracts and the laws which govern them, have assumed a position of fundamental importance in the operation of businesses i.e. in the transactions which they undertake. Subsequently, Australian contract law has undergone a number of changes both on a judicial and legislative level in order to continue to regulate these transactions efficiently and effectively. However, the changes made have not been enough to keep Australia up to speed with the international legal systems of major trading partners. Evidence of this can be found in the recent decision of the High Court in Commonwealth Bank of Australia v Barker. In this case it was accepted that contracting parties have a duty to cooperate

However, there still remain conflicting views as to the precise meaning of good faith. The difference of opinion can largely be split into two groups i.e. those who believe that good faith means honesty and those who argue that it is broader than honesty, extending to an obligation of reasonableness in relation to contractual performance.

Amongst legal scholars there is widespread support for the latter formulation of good faith. In the judicial realm, a consideration of the various decisions of state courts and the information provided in Commonwealth Bank of Australia v Barker, also indicates that the reasonableness iteration of good faith has prevailed over that of honesty alone. In Burger King Corp v Hungry Jack’s Pty Ltd, the NSW Court of Appeal affirmed that good faith related to a requirement of reasonableness. Furthermore, in Barker Kiefel J found that good faith could not be limited to honesty and that it included fairness in

The existence of an implied obligation of good faith was also recognized in 2014 by both the United Kingdom Supreme Court and the Supreme Court of Canada.
C Implied Duty of Good Faith as an Expansion of the Duty of Cooperation
In the recent decision of the High Court in Commonwealth Bank of Australia v Barker, it was accepted that contracting parties have an implied duty to cooperate in the performance of a contract, but they do not have an implied duty of trust and confidence i.e. an obligation of good faith. The duty of cooperation in contract according to the necessity test, has typically been implied in all contracts as a term of law. On the other hand, there have been conflicting views as to how the good faith obligation is to be fully integrated into contract