Good faith and termination for convenience clauses in Australia

Abstract

There is an increased tendency for contracts that provide one party, typically the client, with a right to terminate the contract at their convenience. This is contrary to the typical common law approach of allowing termination of a contract only for a substantial breach by the other side. This article considers the possible legal response to the use of such clauses and, in particular, whether the doctrine of good faith might be used to allow courts to review the use of such clauses in particular cases. The common law has typically been much more reluctant than civil law jurisdictions to recognise good faith in relation to contracts, but the adoption of such a principle might temper the use by the stronger party of a termination for convenience clause in future.