What does "good faith" refer to in legal terms?

In legal terminology, "good faith" refers to a sincere intent to deal fairly and honestly in contractual and other legal obligations. This concept is foundational in various legal arenas, including contract law and negotiations, where the parties involved are expected to act with integrity and honesty towards each other. When parties are assumed to act in good faith, it fosters trust and cooperation, which are essential for effective legal transactions and relationships.

Good faith is particularly significant in the performance of contracts, where it implies that the parties will uphold the spirit of the agreement, not merely its letter, thereby supporting a fair outcome for all involved. This principle helps prevent deceitful practices and encourages ethical behavior, reinforcing the idea that the law expects parties to honor their commitments and engage with each other honestly.