The duty to perform a contract in good faith: two opposing views and an alternative

The law of China, Macau and Hong Kong recognize a duty to perform a contract in good faith albeit with varying degrees of enthusiasm. Both Chinese and Macau law provide for a general duty of good faith in performance while Hong Kong law recognizes such a duty in particular situations. Courts and scholars in all jurisdictions are concerned that the doctrine is irredeemably vague. It concerns the use of discretion by one of the contracting parties, and the use of discretion, by definition, cannot be prescribed by rules. Drawing on the American experience, we will show that its proper limits can be clarified by asking for what purpose discretion was conferred on one of the parties. If he uses his discretion for this purpose, he is acting in good faith. If he does not, he is imposing a risk on the other party which that party was not compensated to assume.