THE MEANING OF ‘GOOD FAITH’

One of the issues considered by Judge Furst QC, sitting as a Deputy Judge of the High Court, in Gold Group Properties Ltd v BDW Trading Ltd [2010] EWHC 1632 (TCC), [2010] All ER (D) 18 (Jul) was the nature and extent of the obligation that is assumed by a party who agrees to act at all times in good faith. He held that it does not impose a fiduciary duty so that the party subject to the obligation is not required to abandon the pursuit of self-interest. Rather it operates to qualify the pursuit of self-interest. Good faith requires the parties to act in a way that will allow both parties to enjoy the anticipated benefits of the contract, but it does not require either party to give up a freely negotiated financial advantage clearly embedded in the contract.

The facts

The first instalment of this litigation was discussed in our April 2010 issue, pp. 8-11 ( Gold Group Properties Ltd v BDW Trading Ltd [2010] EWHC 323 (TCC), [2010] All ER (D) 216 (Mar)). There Mr Justice Coulson held that the defendant was in breach of contract in not developing a site in accordance with the terms of the contract but he gave the defendant conditional leave to defend the claim on the ground that it had an arguable claim that the claimant had breached the contract as a result of its insistence that the minimum prices provision was inserted solely for its benefit and its apparent lack of awareness of the fact that it was required to consider proposed changes to the schedule of minimum prices.