A Background on Good Faith Negotiation
In U.S. contract law, the concept of good faith negotiation is rooted in the legal concept of “implied covenant of good faith and fair dealing,” which arose in the mid-19th century to protect parties from taking advantage of one another in contract negotiation. In 1933, the New York Court of Appeals ruled that every legal contract contains an “implied covenant that neither party shall do anything, which will have the effect of destroying or injuring the right of the other party, to receive the fruits of the contract.” The implied covenant of good faith and fair dealing was eventually incorporated into the Uniform Commercial Code and codified by the American Law Institute.
In current business negotiations, to negotiate in good faith means to deal honestly and fairly with one another so that each party will receive the benefits of your negotiated contract. When one party sues the other for breach of contract, they may argue that the other party did not negotiate in good faith.
In the context of collective bargaining, the U.S. National Labor Relations Act imposes on negotiators the duty to negotiate in “good faith.” The concept of “good faith” negotiation is not fully defined; rather, the courts assess parties’ behavior against a “totality of conduct” standard, write Russell Korobkin, Michael L. Moffitt, and Nancy A. Welsh in a chapter on “The Law of Bargaining” in The Negotiators’ Fieldbook. Generally, parties in labor-management negotiation are expected to agree on an effective bargaining process, consider and respond to one another’s offers, and not do anything to undermine the bargaining process or the authority of parties’ representatives.
https://www.pon.harvard.edu/daily/business-negotiations/negotiate-good-faith/