Can good faith be contractually implied, asks Chris Nillesen
The recent case of Portsmouth City Council v Ensign Highways Ltd [2015] EWHC 1969 (TCC), [2015] All ER (D) 146 (Jul) ( PCC ) sheds further light on the continuing debate on how good faith should (if at all) be implied in English contract law.
While English courts accept that parties to a contract cannot act fraudulently or dishonestly they have generally shied away from implying a duty of good faith. The concept of good faith is based on honesty and fair dealing. Bad faith, by way of contrast, has been distinguished from dishonest behaviour as behaviour that is “improper, commercially unacceptable or unconscionable”.
Parties to a contractual dispute are quick to convince themselves that the conduct of the other party was in “bad faith”. Morally there is perhaps an obligation to act in good faith, however can this be contractually implied?
English courts have reasoned primarily on the following three grounds that it is not appropriate to imply such a duty:
- Courts should principally avoid implying broad over-arching concepts;
- Parties should be free to negotiate
