This decision is a reminder that a duty of good faith will be implied in a commercial contract only in very limited circumstances. In the vast majority of commercial contracts, the parties are entitled to perform the contract in the manner that is most beneficial to themselves without informing or consulting their counter parties as to their intentions. Where, however, there is an express or implied obligation on a party to act in good faith towards the other, the party owing the obligation may be obliged to inform and consult in relation to their future intentions, for example, as to whether they intend to renew a contract for a fixed term or to give contractual notice. Thus, the beneficiary of a contractual obligation of good faith is in a much stronger position than a party to a commercial contract absent such an obligation.
Parties who consider that they need the added protection of an obligation of good faith from their counterparty should clearly stipulate for that obligation when making the contract. In the absence of an express term, those seeking to rescue a weak or hopeless claim for breach of contract by seeking an after the event implication of an obligation of good faith are likely to suffer the same fate as Mr Wales.
Commercial analysis: This was a claim by an independent financial adviser (the IFA) for payment of commission, and repayment of clawed back commissions following the termination of his appointment as the adviser to the corporate pension scheme of CBRE. His claim was against both the provider of the pension, Aviva, and against CBRE. The factual and legal basis of the claim were wide ranging but of interest for present purposes is the IFA’s allegation that both Aviva and CBRE owed to him implied contractual duties that they would deal with him in good faith, and that they were in breach of those obligations by not being open and frank with him about proposals to move CBRE’s pension scheme to a new platform and to dispense with his services. In rejecting that part of the case, the court confirmed the significant obstacles to a party seeking to imply an obligation of good faith.