The Role of Good Faith in Contractual Agreements: Insights from the Michael Micallef Case

In contract law, it is generally presumed that parties act in good faith and adhere to the terms outlined in their agreement. This principle was affirmed in the recent case of Michael Micallef vs. Daryl and Ritianne Borg, decided on 23 January 2026, before Judge Miriam Hayman. The case highlights the importance of clear contractual terms and the legal doctrines that govern their interpretation.

Case Background: Contractual Obligations and Dispute

Mr. Micallef entered into a contractual agreement with the defendants on 10 May 2014. The contract involved the development of land in Birkirkara, Malta, with the defendants responsible for constructing garages, ground-floor shops, and apartments. The agreed payment was €50,000, with a deadline for completion set for February 2016. The contract stipulated a penalty of €50 per day for delays beyond this date. Despite the deadlines, the works were not completed on time, prompting the plaintiff to send judicial letters in July 2016 and October 2017, and subsequently seek court intervention to enforce penalty payments.

Defendants’ Defense and Disputed Terms

The defendants contested the plaintiff’s claims, asserting that the project was completed within the agreed timeframe. They emphasized that, according to the contract, the scope of work was limited to the façade finishings, and did not include additional features such as balconies or ramps. The defendants argued that unforeseen expenses arose due to a hole discovered during construction, which they agreed to share with the plaintiff, and that the ramp was unfinished because the plaintiff was responsible for leveling the area. They maintained that specific details regarding finishings were never formally agreed upon, and that the payment based on airspace rights was excessive, given the planning permits for only five floors.

Legal Principles Governing Contract Interpretation

The First Hall of the Civil Court emphasized that the fundamental principle of contract law is that agreements are entered into in good faith. In its judgment, the court referenced the case of Saint James Hospital Limited vs. Degiorgio Group Limited (Decided 10 December 2025), which clarified two core principles: pacta sunt servanda (agreements must be kept) and the prohibition against contradicting written terms with oral testimony (contra scriptum non scriptum testium non fertur). This underscores that the written contract is the definitive source of the parties’ intentions.

Additionally, the court cited the case of John Spiteri vs. Popeye Investments Limited (3 November 2006), which reinforced that contract interpretation must focus solely on the document itself. The court must interpret the wording in its ordinary sense and consider the intent of the parties at the time of signing. The concept of good faith, as outlined in this context, involves honesty, fairness, and reasonableness in contractual dealings.

Court’s Findings and Ruling

Judge Miriam Hayman concluded that the contract did not specify what was meant by “finishings,” nor did it specify that balconies should be constructed in wood. The court found that the contractor was obligated to build the balconies in a feasible manner, based on the standards of good practice. Since the plaintiff’s expectations regarding the finishings were not documented or specified in the contract, the court dismissed the plaintiff’s claims for penalties and additional damages.

Conclusion: The Importance of Clear Contract Terms

This case underscores the importance of precise contractual language and thorough documentation of all agreed-upon terms. In contractual disputes, courts will interpret agreements based on their plain meaning and the principles of good faith, emphasizing that oral modifications or unstated expectations cannot override written provisions. Both parties should ensure clarity and specificity in their contracts to avoid disputes and legal setbacks.

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