In late January 2025, in the course of deciding whether a contractual decision to vary a contract had to be exercised in good faith, with reasonable judgment and without arbitrariness (a more detailed blog will be found here) the court referred in passing to a contract providing unfettered discretion.
The court left open the question raised in a previous judgment whether the reasonableness and good faith standard (the arbitrio bono viri standard) applies to a contractual discretionary power clearly intended to be completely unfettered. With reference to the previous decision, the court said:
“[The previous judgment] also recognised, that there may be a situation, albeit unlikely, where a stipulation may be so worded that an absolute discretion to fix [the performance of the other party] is conferred on one of the parties. The court, however, declined to express a view on whether such a stipulation would be invalid, as being in conflict with public policy, or whether the fixing of the performance may only be assailed when it is done in bad faith.”
Absolute discretion is never immune from serious public policy concerns or bad faith exercise.