What does Good Faith mean in contract
matter?
We would like to quote the article from
Free Market Book that talked about the
definition of Good Faith.
Good Faith Dispute -- If the amount of
the debt is in dispute in good faith between the parties, the debt is canceled
if the creditor accepts a lesser sum in full settlement of the debt. The basic
idea behind this exception is that the law wants to encourage parties to
resolve genuine disputes as quickly and easily as possible.
DEFINITION:
Good faith is almost impossible to define exactly, but it generally includes a
party’s honest belief and conduct, and a lack of malice or intent to seek an
unfair advantage. In this situation involving a debt, “good faith” would
basically mean that the parties have an honest difference of opinion about the
correct amount of the debt. But if one party knows that the other party is
correct about the amount of the debt, yet continues to claim otherwise, then
there is no good faith dispute. For example, in Case Study 98, suppose Channo
and his uncle had a genuine, good faith dispute as to the amount of the debt.
In that case, there would be consideration for the uncle's agreement to accept
a sum less than he claimed was due as the final amount. The reason is that, in
agreements like this, one party (the creditor) gives up the legitimate right to
take his claim to court, and often accepts less money than he originally
claimed. In return, the other party (the debtor) often gives
new consideration, by promising to pay some amount he did not previously admit
to owing. Of course, if either party agrees to settle the dispute on exactly the
terms the other party wants, there does not appear to be any legal detriment to
the party who is getting everything he wants! In that situation, it appears the
settlement would generally still be enforceable despite the lack of
consideration, presumably because the law simply wishes to promote the
settlement of disputes.
This kind of settlement and payment may
actually be a "substitute contract" or an "accord and
satisfaction," at least in some common law jurisdictions. These are both
types of later agreements of the parties which substitute a different duty for
one owed under the original contract. They can actually result in the discharge
of the prior contract duties. The basic difference between these two is that a
substitute contract immediately discharges the duties owed in the
contract it replaces, whereas an accord agreement merely suspends the prior
duties until it has been performed (the satisfaction). Many jurisdictions say
that where it is not clear which of these two types of agreements the parties
have made, and the subject of the new agreement is a disputed debt, the court
should assume the parties created a substitute contract. These ideas will be
discussed in more detail in Chapter 9 ("Performance and Discharge of
Duties"), 9.7c and 9.7d.
CASE STUDY 98
FACTS
Several months ago, Channo borrowed $100 from his uncle. Channo has managed to
repay $30 of the debt since then. But Channo is a student, and he is struggling
to finish his studies and repay his uncle at the same time. In fact, Channo is
thinking of leaving university before he is finished and taking a job, so he
can repay his uncle more quickly. But when Channo's uncle finds out that Channo
may abandon his
studies,
the uncle is very worried. So the uncle goes to see his nephew and tells him
that he will accept the $30 Channo has already paid as full payment of the
debt. The uncle says that this means that Channo will not have to repay the remaining
$70 to his uncle.
QUESTION
OF LAW Is Channo still legally obligated to repay the remaining $70 to his
uncle?
DECISION
Yes. Under the general common law rule, Channo is still obligated to repay the
remaining $70 he borrowed from his uncle.
The
part payment of a debt is generally not consideration to support the creditor's
promise to cancel the balance of the debt. In this case, Channo's uncle has
made such a promise to Channo. This is not an enforceable promise.
The
reason is that Channo has no new legal detriment, despite his uncle's promise
to accept the $30 Channo had already paid as full payment of the $100 debt. In
fact, while the uncle promised something new--to accept only $30 instead of the
full $100 Channo owed--Channo did not promise anything new. In fact, Channo has
provided no new consideration. So in this case, Channo still owes his uncle
$70.
.......................................................
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ព្រឹតិ្តបត្រច្បាប់កម្ពុជា (ព ច ក)គឺជាក្រុមឯករាជ្យ និងមិនមែនជាបក្សនយោបាយទេ ជាក្រុមស្ម័គ្រចិត្តដែល ធ្វើការ សម្រាប់ធ្វើ ការផ្សព្វផ្សាយអំពីច្បាប់ និងព័តមាន ដែលទាក់ទងនឹងការអភិវឌ្ឍ និងស្ថានភាព សិទ្ធិមនុស្សនៅកម្ពុជា។ រាល់មតិ យោបល់នៅក្នុងព្រឹត្តនេះមិនអាចយកទៅធើ្វជាអំណះ អំណាង ចំពោះមុខ តុលាការ រឺក្នុងគោលបំណងអ្វីផ្សេងទៀត ឡើយ។ ព ច ក គ្រាន់ផ្តល់នូវចំណេះដឹងច្បាប់ និងចំណេះដឹងផ្សេងៗទៀតដល់ប្រជាពលរដ្ឌប៉ុណ្ណោះ។ ប្រសិនលោក អ្នកចង់ដឹងព័តមានបន្ថែមអំពី ព ច ក សូមផ្ញើអីម៉ែលមកយើងខ្ញុំ។ យើងខ្ញុំសូមស្វាគមន៌រាល់មតិលំអដល់ ព ច ក៕
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