“Good Faith”

Quite often, one party accuses the other party of not negotiating in “good faith”. I never gave much thought to the precise meaning of this term until I attended an entertainment law seminar in which one of the speakers mentioned that most entertainment contracts contain a clause requiring the parties to negotiate the terms “in good faith”. He then queried how does one really determine if this clause has been breached, and if so, how does one then calculate damages?

In sum, when one really thinks about it, the definition of “good faith” is elusive, lying in the eyes of the one doing the defining! Like the definition of “fairness”, does one define it from a moral standpoint, legal standpoint, cultural standpoint, religious standpoint, ethical standpoint et cetera? A quick look at online dictionaries shows that “good faith” has been defined as “

[h]onesty; a sincere intention to deal fairly with others”. It… “encompasses a sincere belief or motive without any malice or the desire to defraud others. ” (http://legal-dictionary.thefreedictionary.com/good+faith ). Another website defines it essentially the same way: “honesty, fairness, and lawfulness of purpose; absence of any intent to defraud, act maliciously, or take unfair advantage”


So far, this sounds easy. But… think about it. The plaintiff sincerely believes in the merits of her case; in contrast, the defendants may think it lacks merit or at most, is worth nuisance value. Each is truly sincere in her belief and comes to the mediation with the sincere and honest intention of dealing “fairly” with the other, as she views the matter. So, at the mediation, the plaintiff starts with what the defendant believes to be a “high” or “outrageous” demand but to plaintiff, this is the amount that she sincerely believes the case is worth. In response, the defendant offers a very minimal amount, partially out of retaliation for what she believed to be a demand not made in good faith, but, more importantly, because she truly believes the matter to be worth very little. And so… this bargaining goes on… with each one accusing the other of not negotiating in good faith when in truth, each does have a sincere belief in the merits of her view; it just differs from how the other party sees it. This does not mean that each party’s view is any less valid.

In Psychology For Lawyers, the authors (Jennifer K. Robbennolt and Jean R. Sternlight) (American Bar Association 2012) discuss the concept of “naÌøve realism”: that we each believe that others, as long as they are objective, will view the world as we do, and in the same way. (Id. at 21-23.) Obviously, this is not true. But, it is perhaps this “naÌøve realism” that causes each party to a mediation to think that the other is NOT negotiating in good faith simply because the view taken is contrary to that party’s beliefs.

Some may query: what about the party who shows up to negotiate with no intention to settle? Isn’t she lacking in “good faith”? Not necessarily. For policy or other reasons, that party may not want to settle but has been required to mediate by a court, by a clause in a contract or for other reasons. This is not to say, that the party is acting without honesty or without sincerity. It is simply a question of how that party views the merits and/or policy reasons behind whether to negotiate and/or whether to settle. Clearly, that party is not acting in “bad faith” simply because her position is contrary to the other’s and /or because she does not want to settle. Settlement is never a must.

Like the definition of “fairness”, the definition of “good faith” has many definitions and really depends on who is doing the defining. So… the next time the issue of “good faith” comes up in a negotiation, stop to ponder if it is simply a question of naÌøve realism.

…. Just something to think about.



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