Comparing the General Good Faith Provisions of the PECL and the UCC: Appearance and Reality

Abstract

"Good faith" is a notoriously amorphous and variable concept. Thus it is the interpretation and application of the concept that provides the most important points of comparison for the good faith provisions of the Principles of European Contract Law ("PECL") and the Uniform Commercial Code ("UCC") . The UCC has been in force since the 1950's, and its good faith provisions have been applied in hundreds of cases. In contrast, the PECL is a new phenomenon and its good faith rules have not been applied to actual cases. The comment to PECL Article 1:201, however, includes five concrete illustrations of how the drafters conceive its good faith rule will operate, as well as other suggestions concerning the application of the good faith obligation to particular situations. This article explores how U.S. law, and the UCC good faith provision in particular, would apply to the factual examples adduced in the PECL comment. This discussion reveals mixed results. First, there exist some notable similarities in the operation of the good faith obligation under the PECL and the UCC. Second, there are some situations in which U.S. law would likely reach the same result as under the PECL by invoking doctrines other than good faith. Finally, there may be some important situations in which the outcome under U.S. law would probably diverge from that suggested by the comment to PECL Article 1:201. Although it is important to keep in mind the similarities in the good faith principles of the PECL and the UCC, it is also important to recognize that the divergent outcomes appear to reflect deep-seated differences in the legal cultures behind the two documents.

Keywords: good faith, fair dealing, Principles of European Contract Law, PECL, Uniform Commercial Code, UCC, obligations, comparative law, honesty in fact, pre-contractual liability, culpa in contrahendo