Like the opening sentiments of NEC3, an obligation to co-operate in good faith may sound fine at the honeymoon stage of a contract but, if it all ends in tears, what exactly does it mean? A catering company’s contract with an NHS Trust included such an obligation and provided for deductions from payments where there were “service failure points” but the Trust made “absurd” calculations of the points, including 30,860 service failure points and a deduction of £46,320 for out of date ketchup found in a cupboard. The court ruled that these calculations and deductions, and the Trust’s failure to respond positively to the company’s attempts to resolve the dispute, were breaches of the good faith obligation.
It also said that the precise scope of the duty to co-operate will depend on the circumstances and nature of the contract. In a long-term contract of the sort it was considering, the duty necessarily required the parties to work together constantly, at all levels of the relationship, including working together to resolve the problems that would almost certainly occur from time to time. It also necessarily required the parties not to take unreasonable actions that might damage their working relationship.