1) Guidelines for responsible contractual conduct in the execution and execution of contracts affected by the Covid-19 emergency. (2) Although insurance contracts are subject to an obligation of good faith, this obligation is enshrined in law and its scope has been carefully defined and refined by years of jurisprudence. (3) [2010] EWHC 1535 (Ch) at paragraph [246]. (4) [2019] EWHC 606 (QB) at paragraph [711]. 5) [2007] EWHC 1330.6) Mid Essex Hospital Services NHS Trust v Compas Group UK and Ireland Ltd (t/a Medirest) [2013] EWCA Civ 200.7) Gold Group Properties Ltd v BDW Trading Ltd [2010] EWHC 1632 (TCC), at 91.8) Bristol Rovers (1883) Ltd v Sainsbury`s Supermarkets Ltd [2016] EWCA Civ 160.9) ibid. to [90]. (10) CPC Group Ltd v. Qatari Diar Real Estate Investment Co [2010] EWHC 1535 (Ch) 14, para. [240]. 11) Walford v. Miles [1992] 1 All ER 453. (12) See, for example, MRI Trading AG v Erdenet Mining Corporation LLC [2013] EWCA Civ 156.13) Marks & Spencer Plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72.14) [2013] EWHC 111 (QB) at paragraph [131].
(15) Astor Management AG v. Atalaya Mining plc [2018] 1 All ER (Comm) 547, para. [98]. 16) Yam Seng Pte Ltd v. International Trade Corp Ltd [2013] EWHC 111 (QB); Greenclose Ltd v. National Westminster Bank Plc [2014] EWHC 1156 (Ch); Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (t/a Medirest) [2013] EWCA Civ 200.17) Bates v Post Office (No 3) [2019] EWHC 606 (QB). 18) [2020] EWHC 58 (Comm). Notwithstanding the fact that there is no general duty of good faith in English law, the parties nevertheless have the right – and are increasingly choosing to do so – to include explicit obligations of good faith in their contracts. English courts have generally endeavoured to implement these provisions but, in the absence of a general definition of “good faith”, have been obliged to interpret the specific words chosen by the parties on a case-by-case basis in order to determine the true intention of the parties. In addition, the contract was a long-term distribution agreement which, as noted by the court, required the parties to communicate and cooperate effectively in its performance.
Leggatt J. referred to this type of agreement as a “contract of relationship,” and the case seemed to give authority to the position that a general duty of good faith could be implied in these types of contracts. Among the examples he cited, which fell within the definition of a “relationship agreement,” were joint venture agreements, franchise agreements and the nature of the long-term distribution that was the subject of that dispute. Other examples, while not explicitly mentioned, would likely have included certain types of construction and engineering contracts. “The traditional hostility of the Englishman to a doctrine of good faith in the performance of contracts, to the extent that it still exists, is misplaced.” In cases where a party claims that an implied clause based on the concept of good faith is applicable, the clause should still conform to appropriate rigorous assessments.14 In practice, this means that such a clause would probably not be implied unless a party can properly demonstrate that the contract would lack commercial or practical consistency without it. Certain circumstances in this case led the court to conclude that an obligation of good faith could be implied. The agreement was “skeletal” and was not drafted by lawyers. In the Court`s view, it would be more difficult to include a term in a detailed document written by professionals. The implication of clauses equivalent to an obligation of good faith remains rare in English law, and the guidelines do not change the analysis of whether or not a clause is included in an existing contract. However, like explicit obligations of good faith, English courts may be prepared to consider the guidelines when assessing a party`s conduct by an implied measure in good faith. The factual context of the case was that the respondent, Compass, had agreed to provide cleaning services to the appellant trust under a full commercial contract.
Under this agreement, Compass was required to meet certain agreed performance levels and criteria. Failure to meet Compass` agreed performance levels or criteria would result in the collection of certain deductions. The dispute concerned the collection of these deductions and whether the Trust was entitled to terminate the contract on the ground that Compass had exceeded the number of authorized service failure points in a given six-month rolling period. [6] The judge does not appear to have considered whether such an implied clause would have been lawful under applicable competition law (i.e., under the competition laws applicable in the domestic markets of the territories covered by the distribution agreement). In many jurisdictions, including EU Member States, such a provision could have been regarded as an illegal contract to maintain the resale price. As mentioned above, in 2013, the question of whether a duty of good faith could be included in a contract was examined in Yam Seng Pte Ltd v. International Trade Corporation Ltd. In this case, Leggatt J.A., who also sat in MSC9 as a trial judge, took a relatively broad (and some would say new) approach to the circumstances in which obligations could be included in good faith in ordinary commercial contracts. In his decision, he argued that: The historical reluctance of the courts to imply a general duty of good faith is due in part to the fear that it would likely compromise contractual certainty. Instead, as Lord Judge Bingham put it in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd5, the English courts preferred to develop “piecemeal solutions in response to proven problems of injustice.” There is no generally accepted definition of the term in English law, but in the same judgment, Lord Bingham J. described good faith as the most appropriate through colloquial expressions such as “play fair”, “get clean” or “putting the cards on top of the table” and concluded that it is “essentially a principle of fair and open use”.
On these two points, a duty of good faith was implicit. The first obligation is contrary to the usual norms of trade and the second was included as a fact in the agreement between the parties. Provisions in which the parties have expressly agreed to act in good faith are sometimes used as an approach to ensure a positive contractual relationship. The consequences of inserting such a provision without carefully considering or limiting its effects can be dramatic: what the obligation to act in good faith means will always remain uncertain, unless they are related to specific circumstances or outcomes. (i) did not act in good faith by implicitly undertaking to affect Yam Seng`s sales by offering the same products for domestic sale below the duty-free prices that Yam Seng was authorized to offer; Courts around the world generally recognize the principle that the parties owe each other an obligation of good faith in the performance of their contractual obligations. “a real danger that if a general principle of good faith were established, it would also often be used to undermine and support the conditions under which the parties reached an agreement”. The High Court had ruled that MSC did not have the right to keep a contract alive indefinitely in order to claim persistent demurrage as a result of Cottonex`s wrongful breach. The High Court had also held that an innocent party`s decision to terminate or confirm a contract after the breach of an adverse party`s breach, similar to contractual discretion, must be exercised in good faith and not be exercised arbitrarily, capriciously or inappropriately. “I respectfully suggest that the traditional hostility of the Englishman to a doctrine of good faith in the performance of contracts, to the extent that it still exists, is misplaced.” This was stated by a Supreme Court justice, Justice Leggatt, in the recent case of Yam Seng Pte Limited v. International Trade Corporation Limited.
[1] At first glance, this was a bold statement. While the Guidelines may be taken into account to some extent when the court is required to measure a party`s conduct against an explicit or implied duty to act in good faith, these obligations remain relatively rare and are subject to limits in their scope that the Guidelines will not change.