Legal Definitions - bad faith

Bad faith refers to a deliberate lack of honesty or a deceptive intention in a legal or contractual interaction. It involves acting with a hidden motive, an ulterior purpose, or a disregard for fair dealing, often violating an implied duty to act honestly and reasonably with others. Essentially, it's the opposite of acting in "good faith," which implies sincerity, transparency, and fair play.

Here are some examples illustrating bad faith:

• Real Estate Transaction: Imagine a homeowner selling their house who knows there's a serious, recurring mold problem behind a newly painted wall in the basement. During the sale, they deliberately avoid mentioning this issue and even make cosmetic repairs to hide the evidence, hoping the buyer won't discover it until after the purchase is complete.

  This demonstrates bad faith because the seller acted with a dishonest purpose and fraudulent intent by actively concealing a significant defect. They neglected the standards of fair dealing by withholding crucial information that would impact the buyer's decision, thereby breaching the expectation of honesty in the transaction.

• Contractual Service: A software development firm is hired to create a custom application for a client, promising to use cutting-edge technology and rigorous testing. However, to cut costs and increase their profit margin, the firm secretly uses outdated, less secure components and performs minimal testing, knowing this will result in a less stable and reliable product, while still charging the client for the promised high-quality work.

  This illustrates bad faith because the software firm engaged in untrustworthy performance of duties and acted with a dishonest purpose. They deliberately failed to meet the agreed-upon standards and misrepresented the quality of their work, violating the expectation of fair dealing inherent in their contract.

• Business Negotiation: During a negotiation for a potential business partnership, one company requests extensive confidential financial data and proprietary trade secrets from the other, claiming they need it for due diligence. However, their true intention is not to form a partnership, but rather to gather competitive intelligence to improve their own product line, with no real intent to finalize the deal.

  This is an act of bad faith because the company acted with a dishonest purpose and fraudulent intent. They misrepresented their true intentions and exploited the negotiation process to gain an unfair advantage, disregarding the standards of fair dealing and trust expected in such discussions.