Disputes Matter — October 2013
Unlike other jurisdictions, England and Wales does not recognise a general implied duty of good faith and fair dealing in contract law. However, recent case law has raised the question as to whether it should.
In Yam Seng Pte Ltd v International Trade Corporation Ltd, the parties entered into an exclusive distribution agreement to sell Manchester United-branded toiletries across south-east Asia. The written contract was sketchy, so when the relationship between the parties broke down Yam Seng argued that the agreement contained an implied obligation to act in good faith, which International Trade Corporation had breached. The High Court agreed.
The judgment is fact specific, but it demonstrates that while a duty of good faith will not be implied into all commercial contracts, there will be cases where this is possible looking at the presumed intention of the parties and the background against which the contract was made (a similar approach to contractual interpretation in any event) and where this is necessary to give business efficacy to a contract…
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