Const. L.J. 2007, 23(6), 436-443
Construction Law Journal
2007
Contracting in good faith - giving the parties what they want
Jim Mason
© 2016 Sweet & Maxwell and its Contributors
Subject: Construction law
Other Related Subject: Contracts
Keywords: Construction contracts; Express terms; Good faith; Partnering; Standard forms of contract
*436 Abstract: Examines the duty of good faith as an express obligation contained in the newer standard forms of construction contracts. Describes good faith provisions in other jurisdictions and the seeming hostility of the English judiciary. Discusses the benefits that might arise from “concretising” the duty of good faith in English law and encourages developments in this area.
Introduction
Partnering promotes a co-operative approach to contract management with a view to improving performance and reducing disputes. The relationship between a contractor and a client in a partnering contract contains firm elements of trust and reliance. In so far as partnering is delivered through the medium of contracts, those contracts more often than not contain an obligation that the parties act in good faithto facilitate delivery of those aims.
Partnering contracts pose a problem for contract advisors containing as they do “hard” and “soft” obligations. Whilst all conditions of contract are equal, some, to misquote George Orwell, are more equal than others. Clients can be advised and terms drafted stipulating hard obligations such as payment and quality standards. But what of the soft obligations--and in particular the duty of good faith--what are we to make of them? As one leading commentator put it:
“We in England find it difficult to adopt a general concept of good faith…we do not know quite what it means.”1
*437 The resulting situation is that “soft” obligations are often overlooked and not given any particular importance. This sentiment was picked up by a report expressing the consensus of construction lawyers as being that duties of good faith are not likely to be newly recognised in law by reason of their introduction into partnering contracts.2
This consensus of opinion invites the question whether this is what the users of construction contracts want. Parties having taken the trouble of entering into a partnering contract may feel disappointed to learn that their voluntarily assumed mutual obligations are not enforceable. This article seeks to open a discussion around this point and recommends the “concretising” of the duty of good faith by judiciary and/or parliament to deliver what the parties have chosen for themselves.
The newer contract forms
By far and away the most popular forms of contract are those which make no mention of partnering obligations.3 The dominance of the Joint Contracts Tribunal (JCT) lump sum and design and build forms remains intact. However, the growing trend is to use contracts which move away from formal legal “black letter” contracts to contracts fulfilling a different role which includes seeing the contract as a management tool and a stimulus for collaboration. The challenge for these newer contract forms is to capture this new role whilst providing sufficient contractual certainty in the event that disputes arise.
The link between contracts, partnering and good faith was initially made by organisations such as Associated General Contractors of America making statements such as:
“Partnering is recognition that every contract includes an implied covenant of good faith.”4
These connections are relatively straightforward in the United States, a legal system that recognises the duty of good faith in contracting. The principles of partnering are congruent with the doctrine: trust, open communication, shared objectives and keeping disputes to a minimum. Making the connections in the English context is more challenging, given the absence of the general duty ofgood faith. In its absence it is the partnering contracts themselves which fill the gap.
In the 13 years since the Latham Report, partnering contracts have become significantly more sophisticated in terms of the wording of partnering obligations and the conduct expected. The duty to act in good faith is a common thread.
There are variations on the exact imposition of the duty to act in good faith in partnering contracts. A distinction can be drawn between those which are intended to regulate the parties' behaviour through the contractual terms *438 and conditions (binding) and those which place a non-contractual partnering framework over the top of another contract (non-binding). The latter have been described as seeking to influence rather than mandate certain behaviour.5
The parties to the JCT Non-Binding Partnering Charter agree to “act in good faith; in an open and trusting manner, in a co-operative way in a way to avoid disputes by adopting a no blame culture”. The binding multi-party PPC 2000 requires that the parties “agree to work together and individually in the spi