Good Faith and Fair Dealing as an Underenforced Legal Norm

Abstract

American contract law includes a duty of good faith and fair dealing in the performance of every contract. The duty appears, on first reading, to authorize judges to attach sanctions whenever one party to a contract acts unreasonably towards another. But judicial practice very often falls short of such an expansive standard. This article proposes a novel interpretation of the doctrine that accommodates both the rhetoric of good faith and fair dealing and the reality of judicial enforcement. Good faith and fair dealing, the article contends, is an underenforced legal norm. The duty is valid as a legal norm to the fullest extent, even though courts engage only in partial enforcement of that norm. This article is the first to bring the idea of underenforced legal norms into private law, drawing on the extensive literature on underenforced legal norms in constitutional law, and on analogous ideas in corporate law. The article explores the reasons why legislatures and courts might want to announce a duty whose scope extends beyond what the courts enforce. In private law, as elsewhere, the underenforcement idea allows courts to lend their expressive support to the broader norm while avoiding the negative side effects that attempted full enforcement would entail.