Encyclopedia of Law and Economics

Abstract

Good faith is a blanket clause under which courts develop standards of fair and honest behavior. It gives ample discretion to the judiciary and entitles a court to narrow down the interpretation of statutes or contracts and even to deviate from codified rules, from the wording in the law or the contract or to fill gaps. The law and economics literature relates bad faith to opportunistic behavior and it is accepted that in specific cases where the application of default or mandatory rules leads to opportunism or where both the law and the contract are silent on risk, the judge can resort to the good faith principle. As a result the parties may delegate part of the contractual drafting to the legal system in addition to having reduced apprehension regarding the possibility of opportunistic behavior from the other side. This allows them to keep contracts relatively short and reduces the costs of defensive strategies. Definition Good faith is a blanket clause in civil law under which courts develop standards of fair and honest behavior in the law of obligations, especially in contract law andto some extentin the law of property. Courts also define legal consequences resulting from the violations of such standards, such as reliance damages, expectation damages, injunction, imposing a duty of conduct, and invalidation or validation of a contract. The good faith principle entitles a court to narrow down the interpretation of statutes or contracts and even to deviate from codified rules, from the wording in the law or the contract or to fill gaps. Courts use it as a last resort, if and only if the contract itself or the rules of contract law lead to grossly unfair results. "Good faith" also has found its way into jurisdictions other than those of civil law, as well as into the public international law of contracts and international law in general.

The Influence of Law Enforcement, Pressure, Religious Beliefs, Rationality, Machiavellian Nature on Fraud Intention

“…Several studies have also been conducted to examine fraud and the impacts it causes. Several factors that influence fraud have been studied by several previous researchers, where the independent variables used in previous research include law enforcement [6], pressure [7] ; [8], religious beliefs [9], rationality [10]; [11] and Machiavellian traits [11] [12] [13] [7] The first factor that influences the tendency to commit fraud is law enforcement. Law enforcement can be done by creating legal norms or regulations that aim to regulate parties who have interests [14].…”