The Good Faith Clause: What It Means and How to Negotiate It (2026)

What is a good faith clause? A good faith clause is an express promise that the parties will act in good faith towards each other: honestly, fairly and cooperatively, either in performing the whole contract or in a defined activity such as negotiating, resolving disputes, or running a joint venture. It matters because in common-law systems there is no broad default duty of good faith, so a party who wants one usually has to write it in. What good faith actually requires depends heavily on the legal system and on how the clause is drafted. A bare "the parties shall act in good faith" means much less than a clause that spells out the specific behaviours expected. This article is general guidance, not legal advice. Have a qualified professional review a contract before you rely on it. ## Sample good faith clause ```

GOOD FAITH In performing their respective obligations under this Agreement, the parties shall act in good faith towards each other. In particular, each party shall: (a) act honestly; (b) not do anything to frustrate the purpose of this Agreement; and (c) [list any specific duties, for example share relevant information or cooperate on [defined task]]. Nothing in this clause requires a party to act against its own legitimate commercial interests, or prevents a party exercising an express right under this Agreement.

- **India.** The Indian Contract Act, 1872 does not state a general duty of good faith, though several provisions impose good faith obligations and the courts frame good faith as acting honestly and with fairness. Contracts of insurance are treated as contracts of utmost good faith (uberrimae fidei). Whether the English relational-contract reasoning extends to India is debated by commentators. [VERIFY: current Indian case-law treatment of a general good faith duty in commercial contracts]
- **United States.** Every contract includes an implied covenant of good faith and fair dealing (Restatement (Second) of Contracts section 205; for sale of goods, Uniform Commercial Code section 1-304).
- **Civil-law systems.** Many continental European countries, and jurisdictions such as the UAE, impose a general statutory duty of good faith in performing contracts, which is broader than the common-law position. ## How to negotiate a good faith clause - **Define it concretely.** List the behaviours you mean (share information, cooperate on a named task, not frustrate the deal). Courts read vague good faith narrowly, so specifics are worth more than the phrase alone.
- **Limit the scope.** Decide whether good faith applies to the whole contract or only to a defined activity, such as operating a joint venture or escalating a dispute.
- **Protect express rights.** Add that the clause does not stop a party exercising an express right, such as termination for convenience, so the obligation is not later read as fettering a right either side bargained for.
- **Avoid a bare agreement to negotiate in good faith.** It may be unenforceable for uncertainty. Set out a defined process instead. [VERIFY: Walford v Miles and the current position on agreements to negotiate] ## Common mistakes to avoid - Relying on an implied duty that your jurisdiction does not recognise.
- A bare "act in good faith" with no content, which a court may give little weight.
- A good faith obligation that accidentally cuts across an express right the parties clearly intended.
- Treating an agreement to negotiate in good faith as a firm commitment when it may not bind. ## A note on jurisdiction Good faith is one of the areas where the answer genuinely differs by legal system, so a clause should be written for the governing law, not assumed to mean the same thing everywhere. Civil-law systems generally start from a broad good faith duty; common-law systems do not, and England in particular limits it. In India the position is less settled than in the United States. If a contract is cross-border, say which law governs and draft the good faith obligation to fit it. Varies by jurisdiction. Last verified October 2026. ## Where a contract workspace helps A good faith clause is only as useful as the conduct it describes and the rights it leaves intact. The practical work is checking, across every contract you sign, that a good faith obligation does not quietly undercut a termination right or a discretion you meant to keep, and that the wording suits the governing law. The idea worth taking away is that drafting, reviewing, tracking and governing a good faith obligation can live in one AI workspace tuned to your company, where a contract is read as linked clauses and a term in tension with another is flagged before it causes trouble. [Adira](https://adiralaw.com) is one tool built to read a contract this way. The explanation above stands on its own; a workspace simply makes it easier to keep a good faith obligation consistent with the rest of the deal.