By: Roberto Flores Bermúdez
Senior Partner
Commercial or mercantile relationships, like any relationship between individuals, are prone to generate controversies. The interpretation of a project’s completion schedule, the escalation of prices in materials, and the responsibility for their payment, as well as the conditions of disbursements related to different stages of the projects, are all examples that can lead to different interpretations in the fulfillment of a contract. If left unaddressed, these discrepancies may escalate into a confrontation that affects both the fulfillment of the contract and the commercial relationships between the parties. Discrepancies can have two categories. On one hand, when interpreting a contractual clause or its implementation, one party does so under the belief of being in a regular legal situation, even if there is an error. And on the other hand, when the interpretation is made maliciously for one’s own benefit. These two circumstances play an important role in determining the good or bad faith behavior of the contracting parties.
The axiom of good faith in the contractual relationship emanates from Roman legal tradition. Bona fides was conceptualized as the condition of reciprocal loyalty expected in a bilateral commercial or mercantile relationship. Today it constitutes a “clause of a material nature that informs the entire contractual matter.”[1]
The significant influence of the Napoleonic Code (1804), which incorporated good faith into its contractual regulations, contributed to spreading it as a general principle of law. In the Honduran legal system, the cardinal reference regarding this concept is embodied in the Civil Code, which mandates the execution of contracts in good faith (art. 1546). The same law also states that good faith is presumed, except for certain exceptions, and that bad faith must be proved (art. 724). Good faith is a legal presumption that the law considers certain until its non-existence or inaccuracy is proven.
Good faith or its absence can manifest itself in two stages of a contractual relationship: contract negotiation and its execution. The former is characterized by the commitments that the contractor negotiates and undertakes to fulfill, for example, in bidding contracts. In such cases, as it is a competition by opposition, presenting an advantageous offer of apparent compliance may incline the contracting party to select that proposer. If the offer was made, for example, knowing that the proposed project completion deadline was unattainable, that the costs were not accurate, or even if the offering contractor did not have the necessary skills or knowledge to fulfill the obligation, malice may exist due to the voluntary and conscious illegality of deceiving to gain an advantage for oneself.
In the case of contract execution, bad faith could manifest itself through opportunistic remedies concerning difficulties encountered in its implementation. A classic example is the pretense that the contracting party covers expenses incurred due to delays in the execution of the work when the non-compliance was due to the contractor’s own negligence.
Since its origin in Roman Law, the principle of good faith is oriented towards behavior between individuals in conditions of honesty and loyal fulfillment of their contractual obligations. It is evident that its absence would lead to confrontation and inefficiency in commercial interactions. The success of commercial acts, consequently, requires behavior based on moral and positive values in the services offered and in the fulfillment of adquired obligations.
[1] Fernández Buján, A., “El papel de la buena fe en los pactos, arbitrajes y contratos”, Revista de Derecho UNED, n.7, 2010, p. 292.
