Can a Duty of Good Faith be implied Into a commercial contract?
Businesses often enter into long-term commercial agreements based on an expectation of cooperation and trust. But does that mean the parties automatically owe each other a legal duty to act in good faith?
A recent High Court decision provides an important reminder that good faith will not simply be implied into a commercial contract because the relationship is long-term or collaborative.
Svella Connect Ltd v Virgin Media Ltd
In Svella Connect Ltd v Virgin Media Ltd [2026] EWHC 2223 (TCC), the High Court granted summary judgment in favour of Virgin Media.
Svella provided network services to Virgin Media under three framework agreements. Following a dispute, Svella argued that the agreements were “relational contracts” and that duties of good faith should therefore be implied.
Svella argued that the parties were required to act honestly, cooperate with each other and avoid frustrating the purpose of their agreements.
The court rejected the claim.
What is a “relational contract”?
A relational contract is generally understood as a long-term agreement involving a high degree of cooperation, communication and trust between the parties.
However, the court made clear that simply describing an agreement as a “relational contract” does not automatically create implied duties of good faith.
The starting point remains the wording of the contract itself and the established legal tests for implying terms.
In particular, the court applied the principles in Marks & Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2015] UKSC 72, which require a term to be necessary to give the contract business efficacy or to be so obvious that it goes without saying.
What did the court decide?
The framework agreements were detailed commercial contracts based on NEC standard terms.
Importantly, they already contained an express obligation to act in a spirit of mutual trust and co-operation.
The court found no contractual “gap” which required additional implied duties of good faith.
The agreements also contained provisions which were inconsistent with the idea that the parties had entered into a relationship based on mutual trust and confidence. For example, Virgin Media was entitled to seek competitive bids, there was no guarantee that work would be awarded to Svella and the agreements could be terminated.
The court therefore concluded that there was no basis for implying the additional terms sought by Svella.
What about the settlement agreement?
The position was even clearer in relation to the parties’ settlement agreement.
The agreement had been carefully negotiated to resolve an existing dispute and bring the parties’ troubled relationship to an end.
The court considered it particularly unlikely that additional duties of good faith should be implied into such an agreement. Doing so would risk rewriting the bargain the parties had deliberately negotiated.
What does this mean for businesses?
The decision is a useful reminder that businesses should not assume that a court will fill gaps in a contract by implying broad obligations of good faith.
If cooperation, transparency or good faith are commercially important to a relationship, businesses should consider expressly addressing those obligations in the contract.
This is particularly important when negotiating:
- long-term framework agreements;
- supply and service contracts;
- joint ventures;
- strategic partnerships;
- outsourcing arrangements; and
- settlement agreements.
Clear drafting at the outset can help avoid expensive disputes about what the parties were supposedly expected to do.
The key takeaway
A long-term or collaborative commercial relationship does not automatically mean that a duty of good faith will be implied into the contract.
The courts will start with the parties’ express bargain and will not rewrite a carefully negotiated commercial agreement simply because one party later considers an implied term to be desirable.
If good faith, cooperation or particular standards of conduct are important to your business relationship, it is usually better to address them expressly when negotiating the contract.
Whether you are entering a new business relationship or renegotiating an existing one, BG LLP can help you ensure your contracts clearly reflect your intentions and properly protect your interests.
