Good Faith Case Study

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All positive argument to recognise good faith was recently reaffirmed by Court of Appeal by Compass Group UK and Ireland Ltd v Mid Essex Hospital Services NHS Trust. The dispute arises from the long term business agreement which incorporated an express provision of co-operation with good faith and court had to decide whether the defendant had breached the duty of good faith by making unfair reductions and failing to respond positively. By dismissing lower court decision Beatson LJ observed that good faith clauses must be interpreted with overall context of the dispute. Thus Jackson LJ confirmed that if parties expressly incorporated good faith clause in their agreement then they must intend to bind them with this duty, which required co-operation…show more content…
The dispute arises from a contract to dispose of the claimant’s vehicle. The issue was to resolve that defendant terminated the contract on the ground of repudiator breach and thus excluding them from the tendering process, when the claimant dealt with the vehicle without their consent, therefore the court has to decide whether the defendant had acted in bad faith. While dealing with the case, Dove J considered the length of the contractual relationship, the number of transactions and the substance of the contract. Thus he stated that good faith required the act of mutual trust and confidence between the parties and any act which is inconsistent with the party’s common purpose of long term relationship would be sufficient to constitute breach. His honour justice then recognised that there were not only breaches in express terms of the contract but also the implied terms of the duty of good faith. By satisfying the reasonable person test, Dove J declared that claimant’s grave misconduct had led to the termination of the contract and subsequent exclusion from the tender, therefore, there is no bad faith constitute in accordance of the defendants conduct. Then he referred Leggatt J in Yam Seng and reasoned that while interpreting the terms of the contract, court should take into account the background of the individual case and decide what would be reasonably and objectively to mean. Consequently, court went on to emphasise that several terms of the contract is highly sensitive to the context of the contract itself and thus warrant the implied duty of good faith. There is another sensitive issue also involved in this case, as D&G entered into a contract for dealing with the recovered property of member of the public; it was grave mistake to

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