EXPRESS OBLIGATION TO NEGOTIATEIN GOOD FAITH MAY BE ENFORCEABLE

Petromec v Petroleo Brasileiro SA Petrobas [2005] EWCA Civ 891

In Petromec v Petroleo Brasileiro SA Petrobas [2005] EWCA Civ 891 Lord Justice Longmore adopted a narrow interpretation of the decision of the House of Lords in Walford v Miles [1992] 2 AC 128 and stated that an express obligation to negotiate in good faith may be enforceable. The statement was made obiter and so cannot be said to be binding but it does indicate that there may be a significant difference between an implied obligation to negotiate in good faith and an express obligation to do so. The former will, in all probability, continue to be unenforceable (unless Walford is overruled) but the latter may well be enforceable, at least in the case where the term was drawn up with the benefit of professional legal advice. The issue is considered in more detail by Lord Justice Longmore in paragraphs 106–121 of the judgment of the Court of Appeal. The meaning to be given to the words ‘good faith’ was not decided by the Court of Appeal but the indication given by Lord Justice Longmore (in paragraphs 114 and 121) was that the words would be narrowly interpreted.