Good Faith is a term that is very common in commercial contracts. This is usually an unstated clause in an agreement; it is implied that the parties to the contract will act in good faith. In any case, if the party fails to act as per the terms of good faith, then the party may be held liable for it. This is an implied clause that involves a lot of honesty. Commercial contracts are ubiquitous in almost every type of deal, and this is a clause that is often seen in an arbitration agreement and settlement negotiations. The courts have standards to measure good faith, it does not mean failure to act in fairness, but there is a sense of reasonableness which certainly is expected. Good faith is also something that is often discussed in sports. Sports involves many contracts, and like most of the other agreements, the unstated clause of good faith is embedded in many of them.
Exposition By Different Countries
The legal system in every country is different from one another. Countries like India, England, and Singapore are Common Law countries, but the USA is not a common law country; each state has its legal system. But commercial contracts are standard in every country, and most of their clauses are common in many countries. The term “Good Faith” is not expressly mentioned in India and England. The Indian Contract Act, 1872, does not mention this term expressly. In England as well, the case is very similar; there is no specific recognition regarding “Good Faith”. The English Law was "committed itself to no... overriding principle [of good faith] but has developed piecemeal solutions in response to demonstrated problems of unfairness". Even though it was not expressly agreed anywhere under English Law, in one of the cases, it was established that this term could be applied in contracts in English Law as well. In the United States of America, the situation is not the same, the term “Good Faith” is expressly stated and has been embodied in the “Uniform Commercial Code Section 1-304” that "every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement". When we go back to Europe and look at Germany, under The German Civil Code, executing contract in good faith is a general obligation under Section 242. Recognition of this term might be different in different countries, but every jurisdiction has not ignored its importance.
Should The Unstated Be Stated?
The unstated clause of “Good Faith” is found everywhere, but it is stated in many countries that the importance of specifically stating a clause is showcased in a lot of jurisdictions but not in India. Though it is not expressly stated in India, it is not ignored; contracts relating to insurance include the doctrine of "Uberrima Fidei", which means “utmost good faith”, in cases of insurance, good faith is very important. Parties in this contract have an obligation to disclose all the material information. The author believes that it is high time that this clause doesn’t remain unstated and is expressly recognised as this would help parties to fulfil the contract very smoothly and efficiently. Anything that is written would undoubtedly make the job of courts a little easy, it would help the court to penalise on any breach of contract. In India, as mentioned above, it is still an unstated term but in one of the cases, which was a matter of Sports Law, Board of Control for Cricket in India and Another Vs. Netaji Cricket Club and Others, in this case, the court observed that "the Board's control over the sport of cricket was deep and pervasive and that it exercised enormous public functions which made it obligatory for the board to follow the doctrine of 'fairness and good faith”. The author believes that the concept of “good faith” is very much relevant in India and the court has held it in high regards, making this a stated clause would also make it easier and will reduce the chances of arbitrary decisions.
Current Position In Sports Law
Sports Law is a very vast field, and it involves various kinds of contracts and involves many rules. The most popular football league globally, i.e., Premier League, is also governed by such rules; they are “The Premier League and English Football League (EFL) Rules”. In the year 2020, COVID-19 shook the world, and all the sporting events had paused. As things started to settle slowly, Premier League came up with “Project Restart”, and the clubs involved, and league were asked to act in “utmost good faith” as per EFL Regulation 3.4. Though English Law does not expressly state anything, the EFL and Premier League Rules do. One of the most famous and recent cases of breach of this particular clause was in 2019 where Leeds United was fined £200,000 for what was called the famous “Spygate” scandal. The Leeds United manager Marcelo Bielsa had spied and watched Derby County train before their match against them in the Championship. The other case where this clause was again used was EFL v Stevenage Football Club. On 9th November 2019, Stevenage had requested for a fixture postponement and successfully got it done against Oldham Athletic, which was scheduled on 16th November as three players were said to be on International duty at the time, but 1 one of the players was withdrawn from the International squad on 8th of November. Stevenage Football Club was held liable and was charged under EFL Regulation 3.4. The author believes that it is essential to have this clause expressly stated in almost every sporting league in the world. The loyalty Clause is a part of good faith; in this case, an employer can terminate the agreement he/she has with the employee if an act is done, contrary to the employer's interests. Many athletes worldwide are contracted to certain brands, like Virat Kohli with Puma, Cristiano Ronaldo with Nike and Lionel Messi with Adidas; these athletes cannot wear or use any other brand products if they do, then it would mean they are violating this clause.
Good faith is a very important clause that needs to be included in the rules made by every regulatory body in sports. There are different types of contracts in sports, between athlete and franchise, broadcasters and the league, agent and players etc. There might be numerous differences that can arise between the parties, and also, under this clause, the parties would be restricted to negotiate any deals behind the back as it would be against good faith. Though it is a moral duty of the parties entering into a contract to perform the contract's obligations with reasonableness and good faith, it is still necessary for it to be expressly stated in all the contracts relating to sports.
*The Author is a Scholar, Symbiosis Law School Hyderabad.
(The image used here is for representational purposes only)