Treaty Legal Research

Treaty Legal Research

Economic analysis of the “Good Faith”

Document Type : Original Article

Authors
Fateme Mohseni 1
Hamid Bagherzadeh 2
1 Master in International Economic-Business Law/ Kish Campus-University of Tehran
2 PhD in Private Law, Attorney at law
Abstract
According to economic analysis of law, the principle of “Good Faith” has economic efficiency  in contracts. This, firstly, as a general legal principle, bears obligations and duties over contract’s parties to reach satisfaction and feeling of legal security, then leads to efficiency in contracts. Furthermore, “Good Faith” by the burden of honesty and lack of inappropriate actions liabilities in all of the contract formation steps to the parties prevents opportunistic behaviours caused from contract vacuums, and by protecting policies leads to contractual expansion. “Good Faith” by submitting additional obligations, fills incomplete contracts. This, as an efficient legal Instrumental, assists parties, especially who don’t have enough financial abilities and information resources to predict all upcoming events to increase the economic efficiency of contracts through saving transaction costs. “Good faith” by minimising contractual defects and creating efficiency seeks to increase the profits and economic benefits of the contractors. So, adjusting contractual relationships to avoid from the waste of resources and support of contractual trust is applicable solely by enforcing all parties to adjust “Good Faith” and its arising commitments in bargaining, performance and interpretation levels of the contract. Such a commitment aims to optimise the contractual process and thus increasing the social welfare.
Keywords
Good Faith
Economic Analysis
Law
Commitment
Contract
Subjects
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Treaty Legal Research
Volume 2, summer - Serial Number 3
Autumn 2018
Pages 127-153

  • Receive Date 27 January 2018
  • Revise Date 05 August 2018
  • Accept Date 21 April 2018