Parties to commercial contracts often expect good faith in their ordinary dealings, however, readily accept contractual terms which contradict those expectations. When a matter becomes the subject of dispute, parties quickly adopt their respective contractual positions. Where the contract at issue fails to address or even contradicts ordinary good faith dealings, legal remedies are more confined. For example, a duty of good faith is not readily implied into commercial contracts in Queensland. This was recently confirmed by the Queensland Supreme Court in the case of North Queensland Pipeline No 1 Pty Ltd v QNI Resources Pty Ltd.
The Court clarified that at present, there is no binding decision of the Queensland Court of Appeal, or the High Court establishing an implied term of good faith into commercial contracts in Queensland. Whilst the position of implying a duty of good faith at law is more broadly recognised in NSW, it is not readily implied into more sophisticated commercial contracts. Courts must also consider whether a specific good faith obligation can be implied on the facts. In doing so, Courts apply the Codelfa Constructions and BP Refineries test, whether in the circumstances, implying the obligation of good faith as alleged is reasonable and equitable, necessary to give business efficacy, is so obvious “it goes without saying”, is capable of clear expression and does not contradict any express terms of the contract.
Clearly, where parties knowingly accept contractual terms which contradict their ordinary good faith expectations, an obligation of good faith will not likely be implied on the facts. It is suggested that where good faith expectations reasonably arise in commercial contracts in a particular context, they be expressly adopted by the words of the contract.
