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controlling contractual discretion

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1 results

CONTROLLING CONTRACTUAL DISCRETION
Richard Hooley
Journal:

The Cambridge Law Journal / Volume 72 / Issue 1 / March 2013

Published online by Cambridge University Press:

08 March 2013, pp. 65-90

Print publication:

March 2013
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This paper identifies the source, content and limits of the controls that might be imposed by a court on the way a party exercises discretionary powers conferred under the terms of a contract. It is argued that such controls boil down to a requirement of “good faith”, in the sense that the party exercising the discretion must do so honestly, and that this can be tested by asking whether the decision is one that no reasonable person acting reasonably could have reached in the circumstances. It is suggested that a similar requirement should apply when a contracting party exercises a right to terminate for breach, whether at common law or under a termination clause.