Meaning of the Principles of Good Faith and Rationality in the Interpretation of a Business Contract

Abstract

The article analyses the content of the principles of good faith and rationality in the interpretation of a business contract. The author notes that the lack of a legal definition of the notion “good faith”, on the one hand, makes it difficult to apply this principle literally. On the other hand, it provides for wide judicial discretion. However, judicial discretion must not turn into arbitrary actions. In order to establish legal certainty and predictability of judgments the author formulates the criteria of good faith which, according to the author, take into account professional, independent and risk-related nature of business activity ensuring the balance of parties’ interests. The author also concludes that the requirement of rationality in the interpretation concerns, mainly, the findings of interpretation and formulates the rules for application of this principle.

Keywords:

good faith, rationality, principles of interpretation, contract, business activity, equality of parties, allocation of risks, balance of interests, freedom of a contract