In the view of Leggatt J of the Queen’s Bench division, there is ‘nothing novel or foreign to English law’ in recognising an implied duty to perform contracts in good faith: Yam Seng Pte Ltd v International Trade Corp Ltd,  EWHC 111 (QB). International Trade Corp. (ITC) granted Yam Seng exclusive rights to distribute Manchester United branded toiletries in specified territories (because everyone wants to smell like a footballer?). The relationship was initially rosy, then soured: Yam Seng complained of late and deficient shipments, being undercut on pricing and receiving false information. Yam Seng terminated the agreement and sued ITC for breach of contract or, in the alternative, misrepresentation in inducing Yam Seng to enter into it in the first place.
Yam Seng’s pleadings included a claim that the distribution contact included an implied term requiring the parties to deal with each other in good faith. Justice Leggatt noted that there is ample academic literature that discusses whether the law ought to recognise a general duty to perform contractual obligations in good faith, but no case which considers the question in any depth. While there is authority to suggest that there is no such duty, the judge concluded that there really should be no difficulty in inferring one in ‘any ordinary commercial contract based on the presumed intention of the parties’. Commercial parties have an underlying expectation of honesty and trust, so it is not going out on a limb to say that dealing in good faith is anything more than what they reasonably expect of each other. This contract required the parties to communicate and co-operate; in that context, good faith was the implicit standard. While Yam Seng could not establish that ITC had breached an implicit duty not to undercut prices, there was breach of an implicit duty to provide honest information and to deliver products when promised. This struck at the heart of the trust which was vital to the relationship between the parties. Damages were awarded to compensate Yam Seng for the expenses it had incurred in performing the contract, but the evidence for lost profits was lacking. Yam Seng’s misrepresentation claim also succeeded
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