The Yam Seng case and its aftermath: Possible directions of good faith in contract law

Abstract

The purpose of this paper is to consider the influence of the Yam Seng case on the reception of good faith in English contract law. The Yam Seng case is a landmark case because the principle of good faith is considered eminently suitable for implication in the performance of a contract. Whilst the principle of good faith is considered a fundamental principle in the civil law system in Europe, it has not been so accepted in English common law. In the Yam Seng case good faith is fully discussed for the purpose of including it in English contract law. The concluding remark of the Judge is that ‘the traditional English hostility towards a doctrine of good faith in the performance of contracts, to the extent that it still persists, is misplaced.’ The case is considered by Hugh Collins as an overt reference to the notion of good faith and fair dealing as the third ground for implied terms under Article 6:102 of the Principles of European Contract Law (PECL). In other words, the Yam Seng case is relevant in European contract law. The case is also perceived to have established a firmed basis towards reception of good faith; the Chief Justice of Singapore, Sundaresh Menon, CJ who was comparing the Singapore courts response to good faith with the English courts, said that in the light of the Yam Seng case, ‘the English courts seem poised to take on a more absolute position.'