A recent meeting of the Society of Construction Law in Doha included an insightful talk on the legal doctrine of 'good faith'. This prompted us to ask: what relevance can the doctrine of good faith have to construction contracts in Oman?
It is important to remember that in most jurisdictions in this region, including Bahrain, Kuwait, Qatar and the UAE, the parties to a contract are expressly required by terms of the Civil Code to perform their contractual duties towards each other with good faith. For example, Arabic 172(1) of the Qatar Civil Law says:
.يجب تنفيذ العقد طبقًا لما اشتمل عليه وبطريقة تتفق مع ما يوجبه حسن النية
This is usually translated as: "The contract must be performed in accordance with its contents and in a manner consistent with the requirements of good faith."
Even though the Oman Civil Code (RD 29/2013) contains no equivalent provision, Omani lawyers generally accept that, as a matter of Omani jurisprudence, an identical principle applies in the Sultanate. But if that is so, what is its practical effect, particularly in the case of construction contracts, which are typically entered into between commercially experienced parties and which invariably include a well-understood and comprehensive set of standard terms and conditions? What room can there be for the doctrine of good faith to have any influence on the express and agreed terms of the contract?
In our construction law practice, we see arguments about alleged breaches of the duty of good faith carelessly and poorly advanced either to criticise strict application of a favourable contractual right, or to defend conduct which deviates from contractual obligations. In our experience these kinds of arguments are seldom effective.
So, can the doctrine of good faith be used as a tool to adjust, erode or dilute the effect of clear contract terms? Simply put, no. If good faith could override contractual terms that could leave parties uncertain as to whether or not an agreed (but onerous) term must be adhered to. It would undermine the fundamental principle of contract law that the contract means what it says. Article 155 of the Oman Civil Code, set out below, makes this clear.
يثبت حكم العقد الصحيح النافذ في المعقود عليه و بدله بمجرد انعقاده دون توقف على القبض أو غيره ما لم ينص القانون على خلاف ذلك، و على كل متعاقد الوفاء بما أوجبه العقد عليه من التزامات
It provides that a contract is the law of the parties and (except in very limited circumstances) prevails over all else. As such, parties are bound by the terms they have agreed to and the duty of good faith does not alter their contractual rights or obligations. Indeed, it could be argued that a party seeking to circumvent agreed terms through the application of a good faith argument may itself not be acting in good faith in seeking to do so!
If the doctrine may not be applied to amend contract terms, how and/or when can it apply? It applies as a pervasive duty which the parties must adhere to in performing their duties and exercising their rights under a contract. It means that contracting parties must act honestly and fairly, in a way that does not frustrate the purpose(s) of the contract.
How then can good faith arguments be used in construction disputes? While it is unlikely that a good faith argument would be the keystone of succeeding or failing in a claim or a defence, a party's conduct and any perception of bad faith could potentially influence a court or tribunal's assessment of damages.
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