Is there really no need to act “in good faith”?

It seems sensible that parties to a commercial contract would be under a duty to act in good faith in performing their obligations under a contract. Yet, in a recent decision regarding the implication of a term of good faith in a loan note, the High Court ruled that there was in fact no justification for implying a term of good faith where the overall documentation was extensive and detailed.

Whilst the Court did distinguish between “contractual discretion” and “contractual right” by commenting that “discretion” should still be exercised in good faith, the Court repeated its current mantra that, if good faith is expected within a contract, this expectation should be expressly stated within the contract itself.

This case is yet another example of the Courts refusing to imply terms within commercial contracts and highlights the importance of careful drafting of all contractual documentation. Gone are the days where the Courts can be expected to fill in the blanks of a basic set of “boiler plate” terms. Companies need to invest time and money in their contracts to ensure that they are protected and that they receive in return exactly what they expect from their commercial relationships.

Case details : Myers and another v Kestrel and others [2015] EWHC 916

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