Good Faith in Government Contracts
A well established element of the formation and administration of both commercial and Government contracts is the duty of good faith and fair dealing. This obligation is imputed to all parties to a contract and is defined as “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”1
What does “Good Faith” mean? “Good Faith” is defined as “honesty in fact in the conduct or transaction.”2 This concept generally does not include negotiations but it does include the performance and enforcement of the terms of a contract. However, false and fictitious representations, statements or certification
made to the Government in a proposal or during negotiations may lead to various sanctions.3 “Good Faith” includes any conduct or inaction or statements that can be characterized as “bad faith” predicated on morality and decency. Hence, subterfuges and evasions will violate the obligation of good faith in performance. There is no comprehensive list of the types of bad faith, but a few recognized examples are: lack of diligence and slacking off, willful rendering of imperfect performance and interference with or failure to cooperate in the other party's performance.4
A violation of the doctrine of “Good Faith” in enforcement may arise when dishonest conduct occurs, or asserting an interpretation contrary to a previous understanding, rejecting performance for false or unstated reasons, and abuse of power to determine compliance.
The corollary to Good Faith is “Fair Dealing.” “Fair Dealing” is defined as the conduct of business with full disclosure.5
This concept is applicable to both parties to a contract including the Government in its contractual capacity. “Claims of a breech of the implied covenant of good faith and fair dealing – including claims that the duties to cooperate and not hinder performance of a contract have been breached – are to be treated like any other claim for breach of contract.”6
