Good faith means honesty, fair dealing, and sincere conduct within the legal relationship or rule being applied.
Why good faith matters
Good faith matters because many legal duties assume that parties will not abuse technical rights, mislead each other, or act dishonestly within a legal relationship. The concept can affect contracts, commercial transactions, fiduciary duties, employment disputes, settlement conduct, and statutory compliance.
Good faith does not mean every party must be generous; it means the party must meet the honesty or fairness standard required by the law at issue.
Where good faith appears
Good faith appears in contracts, UCC disputes, insurance disputes, employment matters, fiduciary relationships, bankruptcy, settlement negotiations, and court orders.
Practical example
A buyer and seller have a contract requiring cooperation to close a transaction. One party deliberately withholds routine information to sabotage closing. Good-faith duties may be discussed.
How good faith differs from nearby terms
Good faith differs from bad faith because bad faith suggests dishonest, abusive, or improper conduct. It differs from fiduciary duty because fiduciary duty is a specific higher-duty relationship, while good faith can appear in many settings.
Related terms
Quick knowledge check
Why does good faith not necessarily require a party to give up every advantage?