Case: Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 
Outcome: referred to
Notwithstanding the view I have formed that cl 3.3 of the HofA was contractually uncertain, it is however desirable to examine the existence and content of the asserted duty. That examination will reveal that despite repeated dicta accepting the existence of the duty of good faith of the kind relied upon, Counsel took me to only one case in which it was held, at first instance, that there was a breach of such a duty and yet even then that holding was not determinative of the outcome of the litigation: Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [60] and on appeal in Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40 ; (2006) 149 FCR 395 at [119] and [235] to [238]. Secondly, as the subsequent discussion will reveal, I am not to be taken as accepting that such a duty, however defined, exists. (ii) 132 Although no implied duty to negotiate in good faith was pleaded or relied on, it is convenient to consider the issue for such light that it sheds upon the express duty that was both pleaded and relied on. There has been a recent willingness of Australia Courts to find that a duty of ' good faith ' in negotiations is an implied or incidental term of every commercial contract unless the duty is either excluded expressly or by necessary implication: Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [64] ; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 ; Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187 ; Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) 21 ATPR 41-703; Alcatel Australia Pty Ltd v Scarcella (1998) 44 NSWLR 349; Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 and Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 . 134 It is sufficient to note that intermediate courts have repeatedly been willing to hold that such a duty exists. However, as noted earlier I was referred to only one decision where the existence of such a duty (express or implied) was held to have been breached: Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [66] , a decision which Gyles J subsequently described as ' adventurous ': Council of the City of Sydney v Goldspar Australia Pty Ltd (2006) 230 ALR 437 at [166]. Two things should be noted about the decision at first instance. First, the breach of such a duty was not determinative ( Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [60] ) and the decision was the subject of appeal. Finn and Sundberg JJ at [119] considered that it was unnecessary or inappropriate to deal with the issue given their conclusions on other issues and, further, went on to say (at [119]) that: "Given both the multiple assumptions required to be made if one was to consider [the subject of breach of an implied duty of good faith] and the potentially contentious nature character of it in any event, we do not consider it is appropriate or helpful to enter upon the matter at this point in this appeal." See also Emmett J at [235] [238]. 143 As a result, some academics and judges have resorted to ascertaining the scope of ' good faith ' by focusing on the negative or the exclusions - what constitutes ' bad faith '. This has been described as the ' excluder ' definition on the basis that the good faith requirement cannot actually be satisfied in positive terms: See Summers RS, "'Good Faith' in General Contract Law and the Sales Provisions of the Uniform Commercial Code" (1968) 54 Va L Rev 195; Renard Constructions at 266; Burger King at [150]; and Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [64] - [65] . 146 Specific conduct has also been identified by various courts as constituting ' bad faith ' or a lack of ' good faith ' including: (1) acting arbitrarily, capriciously, unreasonably or recklessly: e.g. see Viscount Radcliffe in Selkirk v Romar Investments Ltd [1963] 1 WLR 1415 at 1422-23 cited by Gyles J in Goldspar at [173]; and Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [65] ; (2) acting in a manner that is oppressive or unfair in its result by, for example, seeking to prevent the performance of the contract or to withhold its benefits: Pacific Brands Sport &amp; Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [65] - [66] ; (3) failing to have reasonable regards to the other party's interests: Overlook Management BV v Foxtel Management Pty Ltd (2002) ACR 90 143 at [67] cited by Peden E, Good Faith in the Performance of Contracts (2003) at 160. (4) failing to act 'reasonably' in general. I consider this requirement in further detail below.