Trust, cooperation and commercial reality: good faith in contracts

Commercial contracts are often viewed as a mechanism for allocating risk and protecting commercial interests. Yet many business relationships rely on more than the express terms of an agreement. They depend on trust, cooperation and a shared expectation that each party will act with honesty and integrity in pursuing the contract’s objectives.

However, English law does not generally convert these commercial expectations, or the human elements of a successful working relationship, into concrete contractual obligations.

A recent High Court decision considered whether a duty of good faith should be implied where two parties have a relational contract that depends on ongoing cooperation and collaboration, with an expectation of mutual trust alongside their commercial objectives. The Court made clear that these features alone are not enough to impose a duty of good faith. Ultimately, there must be a genuine gap in the contract, and the proposed obligation must be necessary to make the agreement work.

The decision in Svella Connect Ltd v Virgin Media Ltd [2026] EWHC 2223 (TCC) therefore raises an important question for businesses: if the parties expect each other to act in good faith, to what extent can they rely on the courts to enforce that expectation?

What does good faith mean in commercial contracts?

There is no single definition of good faith under English contract law. Depending on the wording of the contract and its commercial context, it may require a party to act honestly, remain faithful to the parties’ agreed purpose, cooperate with the other party, or refrain from conduct that would undermine their contractual bargain.

Unlike many civil law systems, English law does not recognise an overarching duty requiring parties to perform all commercial contracts in good faith. Instead, good faith obligations may arise in limited circumstances:

• where the contract contains an express good faith obligation;
• where a duty of good faith is implied into the contract; or
• where one party has a contractual discretion that must not be exercised arbitrarily, capriciously or irrationally, commonly known as the Braganza duty.

The scope of any obligation will depend heavily on the wording and context of the contract. Even an express requirement to act in good faith does not give the Court unlimited power to rewrite the parties’ bargain or prevent a party from exercising a clearly drafted contractual right. Instead, the obligation will be interpreted alongside the other terms of the agreement.

The dispute between Svella Connect and Virgin Media

The dispute arose from three NEC-based framework agreements relating to the expansion of Virgin Media’s fibre optic network. Each agreement expressly required the parties to act in a “spirit of mutual trust and co-operation”. After their relationship broke down, the parties entered into an Exit & Settlement Agreement. This provided for Svella’s exit from two of the framework agreements, while Virgin Media agreed to award further work under the remaining agreement, subject to certain conditions. However, the anticipated volume of work was subsequently reduced.

Svella argued that the framework agreements and the Exit & Settlement Agreement were “relational contracts” and were therefore subject to implied duties of good faith. It relied on Yam Seng Pte Ltd v International Trade Corporation Ltd, in which the Court recognised that duties of good faith may be implied into certain long-term, collaborative agreements based on mutual trust, particularly where the parties have not exhaustively specified their obligations.

Despite this, the High Court granted summary judgment in favour of Virgin Media. It held that describing an agreement as a relational contract does not automatically give rise to an implied duty of good faith. Although the relational nature of the agreement may be relevant, it does not displace the ordinary legal test for implying contractual terms. Ultimately, a term cannot be implied in respect of a matter that the parties have already addressed in their agreement. As the agreements contained no genuine gap requiring a duty of good faith to make them work, the proposed obligations could not be implied

Practical Considerations for Business

1. Include an express obligation where good faith matters

If good faith is commercially important, businesses should address it expressly rather than rely on a court to imply it.

However, simply stating that the parties must “act in good faith” can create uncertainty. The clause should explain what good faith requires in the context of the particular relationship. This may include obligations to:

• cooperate in achieving specified objectives;
• share relevant information within an agreed timeframe;
• discuss proposed changes openly;
• avoid knowingly frustrating the purpose of the agreement;
• escalate disputes before exercising termination rights; or
• exercise particular discretions honestly and for their intended purpose.

The more specific the obligation, the easier it will be to understand and enforce.

2. Ensure the contracts reflects the commercial relationship

Businesses should not rely on broad references to trust, cooperation or partnership to create concrete legal protections. If the relationship depends on minimum work volumes, exclusivity, shared forecasting, regular information sharing or joint decision-making, those expectations should be expressly included in the contract.

As Svella Connect Ltd v Virgin Media Ltd demonstrates, an implied duty of good faith will not be used to fill a gap where the contract has already addressed the relevant issue or to alter the parties’ agreed allocation of commercial risk.

Our Commercial Team advises businesses on the drafting and interpretation of commercial contracts, including good faith obligations, framework agreements, contractual discretions and settlement arrangements. We can help ensure that your agreement reflects how the parties genuinely intend to work together while preserving clear and commercially effective contractual rights.