Article by Saul Litvinoff
An article of the Louisiana Civil Code proclaims that good faith shall govern the conduct of the obligor and obligee in whatever pertains to the obligation. Where conventional obligations are concerned, another article of that Code, like its French ancestor, after asserting that contracts have the effect of law for the parties, restates the traditional rule according to which contracts must be performed in good faith. Among the rules that govern conditional obligations, still another article prescribes that a resolutory condition that depends solely on the will of the obligor must be fulfilled in good faith. When dealing with the object of contracts, after providing that the quantity of a contractual object may be determined by the output of one party or the requirements of the other, the Louisiana Civil Code prescribes that in such a case, output or requirements must be measured in good faith.
In those provisions, good faith imposes a duty of which it is the object, a duty that is no doubt overriding since observance of good faith, that is, performance of that duty, is owed by both the active and passive subject in whatever pertains to an obligation. In a different, though complementary, perspective, other articles of the Louisiana Civil Code explain the advantage, or reward, that the law allows, or gives, to those whose conduct was governed by good faith in the making of a transaction, that is, to those who have fulfilled that overriding duty. Thus, an obligor who has failed to perform an obligation is liable only for the damages that were foreseeable at the time the contract was made if he was in good faith when he so failed, while an obligor who has failed to perform in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of the failure to perform his obligation. A series of provisions of the Louisiana Civil Code protect, that is, give some advantage or reward to, certain third parties in good faith. Such a third party is one who makes a contract with another who is also party to a different contract with a different person whose interest may be adverse to the interest of the so-called third party, which clearly shows that the latter is also party to a contract that binds him to observe good faith. Thus, one who in good faith buys and obtains delivery of a movable thing from a seller who had previously sold, though not delivered, the same thing to another acquires ownership of that thing in preference over the other who bought it first. Such a third party is protected, also, against the consequences of the dissolution, or nullity, of the contract that his co-contractant entered into with another, when the dissolved or null contract is the source of the right of the third party in good faith, who is thus allowed to preserve that right in spite of the dissolution or nullity. Similarly, a third party is protected in, or given an advantage or reward for, his good faith when, according to an article of the Louisiana Civil Code, he is allowed to preserve a right he acquired through a contract with another who had obtained that right through a simulated act, because counter-letters purporting to counteract the effects of simulated acts can have no effects against third parties in good faith.
About the Author
Saul Litvinoff. L.S.U. Boyd Professor of Law; Oliver P. Stockwell Professor at the L.S.U. Paul M. Hebert Law Center.
Citation
71 Tul. L. Rev. 1645 (1997)