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EDITORIAL: The Glue That Holds Deals Together

Posted On: 10/5/2006

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We hear a lot of talk about "good faith" in business dealings, particularly when it comes to contracts. But we rarely hear a comprehensive definition of what "good faith" means. One source identifies good faith as "the key essence of a contract," adding, "the parties are expected to act in good faith in their dealings." Which means what?

In any vital business partnership or relationship, good faith begins with a commitment to a process of sharing insights that come from divergent points of view, regardless of whether the outcome of that process ultimately results in final agreement or disagreement. Good faith therefore entails a certain degree of goodwill, of mutual respect and of giving others the benefit of the doubt -- at least provisionally.

For example, when presented with a statement, action, product, creation or communication from another party that we don't immediately understand -- even one that we profoundly dislike or strongly disagree with -- good faith means holding an open mind at first.  It means granting the possibility that there could be good reasons for the item that we dislike or disagree with.

Good faith means giving the other party an opportunity to discuss what those reasons might be, listening to that explanation and giving it a full, fair hearing. After hearing the explanation and reasoning, if we do not find it persuasive, good faith means being willing to calmly and respectfully explain our reasons for sticking to our guns. In good faith, the other party will give us an equally open-minded hearing.

Good faith means engaging in such a dialog with the belief that in the end, a workable compromise may be found, or that the other party may be happy to accept our point of view, wholesale. This occurs only if we accord them initial and ongoing respect in assuming that the other party begins with a sincere desire to be reasonable and accommodating. Therefore, a crucial component of good faith is the ability to "disagree without being disagreeable."

Bad faith is easy to recognize.  When presented with an item that we don't like on first pass, bad faith is characterized by instantly suspecting the other party's motives, or by instantly questioning or attacking their character, intelligence, life experience, psychological health, professionalism, dedication, etc.

Genuine good faith contains no room for name-calling, jeering or contempt.  Good faith does not indulge in rage. It does not take pleasure in anger and self-righteousness.  It does not later excuse itself with a passing reference to being "hot-headed" or "gruff."

When two business people come to the table with sharp differences on business proposals or performance evaluations, in most cases those differences can be easily resolved with a little intellectual effort -- but only if good faith is present. If good faith is lacking, then it is the human relations side of the equation that presents the major challenge to successful partnership.

No businessman or businesswoman can hope to bat a thousand when turning in proposals or performances that others will approve. But when it comes to acting in good faith, both sides of a partnership must bat a thousand -- or close to it -- if the team hopes to succeed over the long haul.

What is the best guarantor of good faith? After being honorable oneself, the second most important factor is wise selection of business partners. In this process, reputation, direct observation, and intelligence gathering all play vital roles. If a suitor mistreats you -- even slightly, even once -- during the honeymoon, you can be assured he or she will only grow worse after the knot is tied.

Simply put, good faith is the glue that holds business deals together. With good faith, even the most problem-plagued partnership can reasonably hope to survive. Without it, even the most profit-blessed enterprise is doomed to flounder.