A good faith goodbye? Good faith obligations and contractual termination rights [2017] LCMLQ 360

9 August, 2017

This article considers how far obligations which control the exercise of contractual discretions (“discretion obligations”) should apply to clauses giving a right to terminate a contract. It considers the particular contexts in which discretion obligations have been recognised, and argues that these fall broadly into four categories, none of which engage rights of termination. The article considers the attempt to subject termination clauses to discretion obligations in the USA, Canada, Australia and the UK. It concludes that rights of termination do not constitute the exercise of a discretion, but the making of a choice, and that there are sound reasons of both doctrine and authority for not imposing discretion obligations on termination rights.