Consequences
Burger King subsequently sought special leave to appeal to the High Court of Australia, which was granted. However, the appeal was subsequently disposed of after the parties mutually consented to orders.
The case has been recognised as one among several cases indicating that " duty of good faith in the performance of contracts is on the agenda of Australian contract law". Horrigan identified the case as one of a number of cases in which New South Wales courts were leading the way in terms of good faith in Australian contract law, while noting that the idea has yet to catch on extensively in other jurisdictions, identifying good faith as one of the important unresolved areas of "fairness-based business regulation".
To the extent that the decision represents a trend towards treating good faith as an implied term in many contracts, or possibly even a universal term, it has been criticised in a number of ways.
Adrian Baron has argued that the implication of a term of good faith runs contrary to basic principles of contract law, because it tends to disregard the reality that (at least in commercial contexts) parties to a contract "pursue their own commercial interests, and enter into terms that reflect the risks and benefits that each party is prepared to bear". Baron argued that in 1990, when the parties entered the Development Agreement, "it would have been plain to Hungry Jack's that if certain events occurred, Burger King could, at its option, terminate the agreement", and that the contract sufficiently identified the circumstances warranting termination of the contract, with the result that "he appendage of a requirement of reasonableness and good faith by the court to the agreement was inconsistent with the bargain freely entered into by the parties."
Carter and Peden have argued that the case, along with Renard Constructions, introduced a number of "unexplained anomalies in the law of termination clauses", including creating inconsistencies with other precedents relating to powers of sale and equitable limitations on challenging the termination of sale of land contracts. Carter and Peden further argued that an implied good faith term is unnecessary, because basic contract principles already account for it, and it can only serve to introduce inconsistencies, stating that "t seems clear that there are some who see Australian contract law as the 'poor relation' in comparison with other jurisdictions when it comes to good faith" and that " term of good faith is then implied almost by way of apology to the parties."
This case was one of a number of cases relied on in argument before the High Court of Australia in the case of Royal Botanic Gardens and Domain Trust v South Sydney City Council, however the court dealt with the dispute without needing to consider the issue, "technically reserv for another day conclusive response" to the question of implied terms of good faith. As of August 2008, the case has yet to be considered in any other High Court cases.
Read more about this topic: Burger King Corporation V Hungry Jack's
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