The Diverging Meaning of Good Faith
24 Pages Posted: 20 Oct 2008
Date Written: October 10, 2008
This article explores the meaning of "good faith" in the context of corporations and unincorporated entities. The courts, particularly in Delaware, have developed two different approaches. In the corporate arena, the courts are fashioning a notion of good faith that seems to require an examination of director motivations. In the unincorporated arena, good faith has a meaning grounded in contract law. These are two different concepts and reflect the fundamental differences between corporations and unincorporated entities, with the former based on fiduciary duties and the latter on contract. There are, however, indications that this "divergence" is starting to disappear, and this article discusses that trend as well.
Keywords: Good faith, fiduciary duty, corporation, partnership, limited liability company
JEL Classification: K10, K20, K22
Suggested Citation: Suggested Citation