Commercial Contracts: are clear general endeavours/good faith conditions required?

Commercial Contracts: are clear general endeavours/good faith conditions required?

Contractual terms in a commercial agreement must be as explicit as possible if the parties wish them to mean what they intend them to mean.  A recent ruling on good faith /general endeavours obligations is the latest in a theme of numerous rulings involving the commercial terms that have not been drafted sufficiently clearly.

The top Bahamas law firm ParrisWhittaker is highly experienced in advising business organisations on their contract terms.

What’s the background to this case?

This case was heard in the Court of Appeal in the UK and has important, persuasive effect on the courts in The Bahamas.  It concerns good faith/general obligations terms that were not expressly set out in the contract.

Sainsbury’s is a leading supermarket in the UK.  The dispute arose as to whether Sainsbury’s was entitled to terminate a conditional contract to acquire land owned by Bristol Rovers football club for a new retail led development (to include a new Sainsbury’s superstore).

In relation to the contractual conditions involving planning permission, the primary issue was whether Sainsbury’s obligations in the contract to act with good faith and to use all reasonable endeavours to obtain satisfactory planning consent, obliged it to go above and beyond its obligations to obtain a planning consent contained elsewhere in the contract.

The Court of Appeal said it did not - and held that given the existence of detailed obligations elsewhere in the contract dealing with planning, had the parties intended to agree specific ‘general endeavours’ conditions the court would have expected to see them in the relevant clause.  It was, therefore, unable to accept such a broad interpretation as claimed by Bristol Rovers.

What does this mean?

General endeavours/good faith obligations must be clearly and expressly spelt out in a commercial contract in all relevant clauses, otherwise you put at risk the result you require.  Each clause should be considered and negotiated carefully – relying on general endeavours clauses to achieve a desired outcome might be insufficient to protect your interests.

How can we help?

For expert, incisive legal advice on commercial contract drafting, call the experienced commercial lawyers at ParrisWhittaker.  If you are considering or negotiating new contract terms, we can help you with clear, effective drafting of commercial contract terms to fully protect your interests.  If you have a potential dispute in relation to existing commercial contracts, contact us now for expert advice on how the law may interpret those clauses. 

1 Bristol Rovers (1883) Ltd v Sainsbury’s Supermarkets Ltd [2016] EWCA Civ 160