Gilmar Stelo, a lawyer with more than four decades of experience and founder of Stelo Advogados, highlights that objective good faith represents one of the most relevant principles of contemporary Brazilian contract law. Explicitly established in the 2002 Civil Code, this principle sets a standard of conduct that parties must observe throughout the entire contractual relationship, from preliminary negotiations to the period following the fulfillment of the agreed obligations. Read this article to the end to understand how this principle works in practice!
What distinguishes objective good faith from subjective good faith?
The distinction between objective and subjective good faith is fundamental to understanding the scope of the principle in business relationships. Subjective good faith refers to the psychological state of the agent, that is, the genuine belief that they are acting correctly. Objective good faith, on the other hand, is independent of the parties’ intentions; it imposes an external standard of loyal, transparent, and cooperative behavior that must be objectively observed, regardless of what each party thought or intended when entering into the contract.
Gilmar Stelo explains that, in the business context, objective good faith functions as a general clause that fills contractual gaps and guides the interpretation of ambiguous obligations. When a contract does not provide for a specific situation, courts rely on the principle to determine what conduct would be expected from parties acting with loyalty and transparency.
The three functions of objective good faith in contracts
Legal doctrine recognizes three central functions of objective good faith: interpretative, integrative, and limiting. In its interpretative function, the principle guides how ambiguous clauses should be understood, favoring the meaning that best reflects loyalty between the parties. In its integrative function, it creates ancillary duties not expressly stated in the contract, such as obligations of information, cooperation, and care regarding the counterparty’s interests. In its limiting function, it restricts the abusive exercise of formally valid contractual rights.
Stelo Advogados applies these three dimensions in an integrated manner when analyzing contractual disputes. Gilmar Stelo points out that many business disputes arise precisely from the parties’ lack of understanding regarding the ancillary duties generated by objective good faith, especially those related to transparency in providing relevant information during contract execution.
Objective good faith and protection against contradictory conduct
One of the most relevant developments of objective good faith is the prohibition of contradictory behavior, known in legal doctrine by the Latin expression venire contra factum proprium. This doctrine prevents a party from benefiting from a position that contradicts its own prior conduct, upon which the counterparty legitimately relied. In long-term contracts, this protection is especially relevant, since repeated behaviors over time create legitimate expectations that the law protects.
Gilmar Stelo emphasizes that it is common to observe situations in which companies attempt to exercise contractual rights in a manner incompatible with their historical conduct within the relationship. In such cases, invoking venire contra factum proprium may be decisive in protecting the client’s interests, both in out-of-court negotiations and in judicial litigation.
Objective good faith as the foundation of security in commercial relationships
Ultimately, objective good faith serves the broader purpose of providing predictability and stability to commercial relationships. When parties know that disloyal or contradictory behavior may be legally challenged, there is an incentive for contracts to be executed with greater transparency and cooperation. This environment of trust reduces transaction costs and fosters stronger and more productive long-term business relationships.
Gilmar Stelo reinforces that understanding and correctly applying the principle of objective good faith is the responsibility of business lawyers committed to genuinely protecting their clients’ interests. For Stelo Advogados, this principle is not merely a legal argument, but a guideline that permeates the firm’s entire approach to contractual matters.
Author: Diego Rodríguez Velázquez
