Duty to act with ‘honesty and integrity’ implied (and other good faith cases)

D&G CARS v ESSEX POLICE AUTHORITY [2015]

An overriding duty of ‘good faith’ is a concept imposed by law in many continental European jurisdictions but not one which is generally implied under English law (at least not in those terms). There have been a number of decisions in 2015 where the Courts were asked to decide whether a general duty of good faith should be implied into a contract. The Courts have also been asked to consider the impact of various express contractual provisions along similar lines. Here, the Court confirmed that a general duty to act with ‘honesty and integrity’ should be implied but other cases which we have also reviewed have resulted in a different outcome: Portsmouth City Council v Ensign Highways, Myers v Kestrel and Greenclose v National Westminster Bank.

Facts:

Decision:

PORTSMOUTH CITY COUNCIL v ENSIGN HIGHWAYS [2015]

Here, the Court ruled that there had been no breach of an express duty of good faith because according to its wording, it was limited in scope. So far as an implied term was concerned, the Court formulated the implied obligation in a much more traditional way, at least for English law.

Facts:

Decision:

MYERS v KESTREL [2015]

This was another example of where a claim that a duty of good faith should be implied was unsuccessful

Facts:

As part of the sale of Myers’ business, Kestrel (K) issued various loan notes to Myers (M). K then amended one of the loan notes which M said would effectively make the loan note worthless. M argued that K should be under an implied duty to exercise the right to modify the loan note in good faith.

Decision:

GREENCLOSE v NATIONAL WESTMINSTER BANK [2014]

Points to note:

Although the outcome of the above cases was not always consistent, a number of recurring points do emerge:

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