Panel 3: Contract Interpretation and Good Faith
The George Washington University Law School’s Dean Blake Morant began the third panel, “Contract Interpretation and Good Faith” by introducing and welcoming Martin Hogg, Professor of the Law of Obligations from Edinburgh Law School; Robert Stevens, Herbert Smith Freehills Professor of English Private Law from the University of Oxford; and Lawrence Cunningham, the Henry St. George Tucker III Research Professor from The George Washington University Law School.
Speaking first, Professor Stevens offered that our use of language in everyday life is no different than our use of language in the law. The meaning of the words used in everyday life and in law is controlled by the objective meaning of those words. To illustrate this point, Professor Stevens provided the following example: “I will sell you a white cat for $100” does not really mean “I will sell you a black dog for $20.” Words, however, also carry a subjective meaning. Professor Stevens addressed this by stating that the law is not in the business of enforcing someone else’s subjective meaning, even when there is evidence of that subjective meaning. Further elucidating the complex issue of meaning, Professor Stevens humorously illustrated the difference between literal and contextual meaning using examples found in everyday life, such as an escalator sign stating “Dogs must be carried.” Touching on both parole evidence and rectification, and how English law differs from American law, he briefly reaffirmed that the law does not ensure subjective intentions are carried out. Professor Stevens concluded by proposing that the subjective meaning of language should not be used to enforce a deal, but it can be used as a reason not to enforce a deal under certain circumstances.
Professor Cunningham followed up by discussing his paper, Contract Interpretation: From Winner-Take-All to Right-Tool-for-the-Job. Describing the two schools of thought in contract interpretation, textualist and contextualist, Professor Cunningham highlighted how jurisdictional flexibility has led to state courts having seemingly conflicting opinions about what is the proper approach as a result of choosing the “right tool for the job.” The contemporary debate has resulted in each school pushing for either more formalism or more contextualism, but Professor Cunningham noted younger scholars are encouraging the field to go beyond the binary. Providing examples of flexibility, Professor Cunningham illuminated the current movement away from the binary phase of contract interpretation and its utility through examples of contract entered into by Berkshire Hathaway Inc.’s CEO, Warren Buffett.
Rounding out the discussion with a thorough breakdown of procedural and substantive good faith, Professor Hogg laid out the flaws in the courts’ use of good faith in contract interpretation. Professor Hogg discussed the flaws with both the definition of procedural good faith and the current approach to contract interpretation, highlighting the differences between the British, Scottish, and American courts. In response to these flaws, Professor Hogg argued first that courts cannot imply terms simply because they believe that rational contracting parties in good faith would have acceded to them, and second that good faith does not conceptualize all contextual relationships. Turning to substantive good faith, Professor Hogg noted that when implying terms into a contract, good faith permits self-interest, but the permitted self-interest reflects qualities such as openness, honesty, and fidelity. Additionally, he noted that British courts have consistently stated that context is paramount when implying terms into a contract. Having touched on some of the differences in the use of good faith among British, Scottish, and American courts, Professor Hogg reviewed some of the twelve conclusions he reaches in his paper. Among the conclusions provided, Professor Hogg highlighted both that there is no jurisprudence for using good faith as a gateway for implying terms and that some of the requirements of substantive good faith could be written into law as rules rather than implied terms.
The panel concluded with detailed and thoughtful questions from Dean Morant, University of Oxford Professor and Associate Dean Mindy Chen-Wishart, and other members of the audience. The Law Review and audience members were grateful for the panel’s successful framing and exploration of the complexities of contract interpretation and good faith.
This summary was authored by Law Review Executive Editor Kaylyn Sands.
