Contracts without good faith

Can a contract be entered into without good faith? One would think logically not, but apparently the Court of Appeal does not agree. In the case of Seven Seas Industries Sdn Bhd v Philips Electronic Supplies (M) Sdn Bhd & Anor, the Court of Appeal was asked to read into the contract an implied term that parties are to act in good faith, with honesty, and in a reasonable manner. One would assume these are very self-evident implied terms. Unfortunately, the Court of Appeal held otherwise. According to the learned judges, a Court would not read any implied terms into the contract if the contractual terms are clear as of themselves. This is even so despite the terms sought to be read into the contract being so basic and fundamental.

This new decision shows all the more why it is so necessary to ensure contracts are properly drawn up in the first place. Otherwise, even very basic issues may be overlooked, causing much more substantial losses at the end of the day.

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