International Construction Law Review
GOOD FAITH CLAUSES IN CONSTRUCTION CONTRACTS: FINE SENTIMENTS IN SEARCH OF SUBSTANCE
BRIAN MASON
Mallesons Stephen Jaques, Melbourne, Australia
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“The foundation of justice is good faith” declared Cicero, and this has been warmly embraced in many civil law jurisdictions by the recognition of an overriding contract law principle “that in making and carrying out contracts parties should act in good faith”.2 Common law jurisdictions—and English courts in particular—have been considerably more circumspect when considering the existence of such an obligation. There have been frequent judicial pronouncements to the effect that “There is no general doctrine of good faith in the English law of contract.” 3 This common law position, however, may be contrasted with a recent trend in which the standard form contracts frequently governed by English law contain provisions requiring the parties to exercise their rights and perform their obligations in good faith.4
This trend was instigated by the 1994 Latham Report into the UK construction industry’s procurement and contractual arrangements. This report strongly advocated a collaborative approach when procuring construction projects and emphasised the importance of teamwork and partnership to resolve potential disputes and to abandon the perceived blame-and-claim culture.5 The second edition of the NEC Engineering and Construction Contract (“NEC2”) was the first standard form construction contract to adopt the recommendation of including an overriding obligation requiring the exercise of mutual trust and co-operation, and this has been replicated in the third edition of this contract (“NEC3”).6 More recently, the 2009 revision to the suite of construction contracts first published by the Joint Contracts Tribunal (“JCT”) in 2005 enables the
1 I am grateful to Nicholas Downing, Martin Bridgewater and Miranda Ramphul of Herbert Smith LLP for the guidance they provided in the preparation of this article and to His Honour Humphrey LLoyd, QC, for his comments on earlier drafts.
2 Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd [1989] QB 433, per Bingham LJ at 439.
3 James Spencer & Co Ltd v. Tame Valley Padding Co Ltd, unreported, 8 April 1998 (CA), per Potter LJ. See also London Borough of Mertonv. Stanley Hugh Leach Ltd
(1985) 32 BLR 51, per Vinelott J at 80.
4 Although the standard form construction contracts considered in this article do not typically use the phrase “good faith” and instead utilise language such as “mutual trust and co-operation”, “fairness”, “fair dealing” and “trust and respect”, for convenience these clauses shall be collectively described as good faith clauses.
5 M Latham, Constructing the Team: Final Report of the Government/Industry Review of Procurement and Contractual Arrangements in the UK Construction Industry (Department of the Environment, 1994) at 87.
6 NEC2, cl. 10.1 and NEC3, cl. 10.1.
The International Construction Law Review [2011
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