Good faith under the horticulture code

  • Traders and growers must deal with each other in good faith, under the Horticulture Code of Conduct.
  • Failure to act in good faith can lead to penalties.

What good faith means

The Horticulture Code of Conduct doesn’t define what good faith means.

However, the code does:

  • state that good faith is to reflect the unwritten law. This is judge-made law, known as the ‘common law’. Under common law, good faith requires parties to an agreement to act reasonably
  • outline certain principles of dealing in good faith. A court may use these principles to decide whether a grower or trader has acted in good faith. A court can also consider other relevant matters.

Not dealing in good faith

Certain behaviour may not be dealing in good faith. This is a breach of the horticulture code and can lead to fines or penalties.

This behaviour can be by a grower or trader:

  • acting dishonestly
  • failing to consider the genuine interests of the other party.

The courts have also found that not dealing in good faith can be behaving:

  • for some ulterior or underhanded motive
  • in a way that undermines or denies the other party the benefits of a contract.

Growers and traders cannot exclude or limit acting in good faith from their terms. This applies to any document, including the horticulture produce agreement.

Terms are invalid if they limit acting in good faith.

When to act in good faith

Growers and traders must deal in good faith throughout their relationship, including:

  • during pre-contractual negotiations
  • when acting under a horticulture produce agreement
  • when resolving a dispute
  • even after a horticulture produce agreement has ended.

Acting in the best interest of the business

Dealing in good faith means growers and traders must pay attention to each other’s rights and interests.

However, it does not:

  • require a grower or trader to act in the interests of the other
  • stop a grower or trader from acting in their own commercial interests
  • force one party to make changes to an agreement that are requested by the other party
  • prevent a party from deciding not to renew or extend a trading relationship.

Determining whether you are dealing in good faith

Growers and traders can ask themselves questions to work out if they may not be dealing in good faith.

  • Have I been honest with the other party?
  • Have I considered the other party’s interests?
  • Have I made timely decisions?
  • Have I consulted with the other party about issues or proposed changes?
  • Do I have a contractual right to act in that way?
  • Have I managed the trading relationship without pressure?
  • Am I forcing any conditions on the other party? Are those conditions necessary to protect my interests?
  • Where a dispute has developed, have I attempted to resolve the dispute, either directly with the other party or through mediation?
  • Am I acting for some ulterior purpose?

Examples of not dealing in good faith

Dishonest business dealings

An avocado farmer uses an agent to sell their produce to the market. The farmer instructs the agent to get the best possible price for the produce.

The agent finds a buyer who is willing to pay $40 per tray for the farmer’s produce. The agent tells the farmer he was only able to get a price of $35 per tray. The agent then keeps the difference between the price the buyer paid and the price quoted to the farmer.

The agent has likely not dealt in good faith because they acted dishonestly to get a financial benefit for themselves. At the same time the agent denied the farmer their entitled revenue under the agreement.

Pressuring other party to act illegally

A citrus grower has compared the terms of trade from 3 merchants and has decided on the merchant they want to use. The grower does not have a horticulture produce agreement with the merchant.

The merchant asks the grower to negotiate an agreement before the next shipment. The merchant explains that it is illegal to trade in horticulture produce without a horticulture produce agreement.

The grower refuses to enter into an agreement but continues to supply produce to the merchant. The grower demands that the merchant pay for the delivered produce or return it at the merchant’s cost.

The grower has likely not dealt in good faith in this situation. The merchant must either break the law or incur extra costs to return the produce.

See also

Horticulture Code of Conduct

Competition and Consumer (Industry Codes—Horticulture) Regulations 2017

Dispute resolution under the horticulture code

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