What is the Doctrine Of Utmost Good Faith?

The doctrine of the utmost good faith, known in latin as "uberrimae fides", is a legal doctrine stating that parties in a contract must act honestly without withholding information or misleading each other. This doctrine is the minimum standard that parties must adhere to in a contractual agreement and it is applied to all phases of human activities. The Doctrine of Utmost Good Faith is observed in transactions in insurance, financial markets, real estate, and other businesses.

How the Doctrine Of Utmost Good Faith Applies in Insurance Contracts

In an ordinary commercial contract, the doctrine of utmost good faith mandates parties to bargain fairly and honestly without misleading one another. This doctrine serves as the basis of trust in a contractual agreement, where both parties believe that the transaction is truthful and ethical. In the insurance, this doctrine of utmost good faith is a law that mandates the insurer and the insured to disclose all the facts needed in a policy. The doctrine bars any the parties from withholding any information that is essential to the contract. While the insured must provide all details including health history and other contingencies, the insurer must disclose all the details of the policy, including the terms and conditions. This doctrine first originated in the case between Carter and Boehm, before it was developed in common law and subsequently added in the Marine Insurance Act 1906.

What happens if you violate the Doctrine of Utmost Good Faith?

Violations of the doctrine of good faith in a contract often has legal consequences depending upon the nature or degree of the violation. The injured party can take legal actions against the other party that provides inaccurate information. This can lead to contract damages. Also, the contract is voidable by the injured party. The same conduct may constitute criminal fraud.

Related Topics

• Contract Law (Intro)

• What is a Contract?
• Contract Theory Definition
• Meeting of the Minds
• Doctrine of Utmost Good Faith 
• Aleatory Contract Definition
• What are the sources of contract law?
• Restatement of Contracts
• Uniform Commercial Code
• Convention on Contracts for the International Sale of Goods (CISG) 

• What is a Unilateral Contract vs a Bilateral Contract?
• What is an Express Contract vs an Implied Contract?
• What are the requirements to form a Contract (Offer, Acceptance, Consideration)?
• What is an Enforceable Contract vs. a Valid Contract?
• What is a Void Contract vs a Voidable Contract?
• Adhesion Contract 
• What is Mental Capacity to contract?
• What is the requirement of a Lawful Purpose?
• What are common types of Voidable Contract?

• What is an Offer?
• Sum Certain (Contracts) Definition

• When does an offer to contact terminate?
• Counterparty Definition
• Mirror Image Rule?
• Rule for Sale of Goods
• Silence is Not Acceptance?
• Mailbox Rule
• Shrink-wrap Agreement Definition
• Click-Wrap Agreement Definition
• What is Consideration?
• What is Promissory Estoppel?
• When is a contract required to be in writing Statute of Frauds?
• What type of writing satisfies the statute of frauds?
• Exceptions to the Statute of Fraud
• Documents Under Seal
• Who Can Sign Contracts on Behalf of a Company?
• E-Sign Act
• Privity of Contract
• Who are third-party beneficiaries to a contract?
• What is assignment and delegation of a contract?

• When is a party's Duty of performance?
• Aleatory Contract
• What is an Executed contract vs an Executory contract?
• Inchoate Definition
• Evergreen Contract

• What is Performance, Substantial Performance, and Breach of a contract?
• What is performance of a Divisible Contract?
• When is a party's duty of performance discharged?
• What are conditions to Contract (Precedent & Subsequent)?
• Abandonment Option (Contract) Definition
• Cooling Off Rule Definition
• What is tender performance of a contract?
• What are Impossibility and Impracticability
• What is a Frustration of Purpose?
• Waiver or Release from Contract
• Accord and Satisfaction
• Force Majeure Clause
• Novation
• What is a Breach of Contract?
• Repudiation (Contract) Definition
• Anticipatory Repudiation
• Acceleration Clause (Contracts) Definition
• What methods exist for resolving a breach?
• Assumpsit
• What remedies exist for a breach of contract?
• Rescission (Contract)
• Exculpatory Clause
• Hold Harmless Clause
• What is Efficient Breach?
• Organization of a Contract
• How to Read the Contract
• Boilerplate
• Contract Representations & Warranties
• Contract Covenants
• What rules does a court follow in interpreting a contract?
• Addendum 
• Allonge Definition
• What is the Parol Evidence Rule?
• What is a complete integration vs a partial integration?
• Exceptions to the Parol Evidence Rule
• Patent and Latent Ambiguity in a Contract
• Service Level Agreement Definition 
• Offtake Agreement