The Principle of Good Faith in Contract of Insurance

Abstract

            Contract in general, the principle of good faith is considered as
a fundamental concept of civil and commercial law which needs to be
respected by the parties. This principle is used to ensure the fairness in
terms of exercising the rights and settlement between people. Good faith
is originated from moral and ethical principle which is recognized by all
nations since good faith is regulated as law. However, in terms of the
insurance contract, this contract is different from other form of contract
namely; it is based on “Contracts of the Utmost Good Faith” principle. It
can be said that the insurance contract contains special characters particularly on a reciprocal contract principle which is applied in an unequal
repayment. The negotiation for equality of both parties will be used other
form of contracts to consider instead of the contract of insurance.
Therefore, in order to be treated equally from both sides, the assured
must apply the principle of Good Faith. This article intends to explain the
history and the main idea of the principle of good faith in contract of
insurance in order to create the fairness to both parties which seems to
be an ultimate goal of law.
Keywords: Principle of Utmost Good Faith, Good Faith