Duty of Good Faith Will Not Be Implied to Restrict Termination Rights
In recent years, a duty of good faith has been an evolving area of English law. In a recent case, the High Court has kept that concept in check and would not allow it to affect the interpretation from other express words in an agreement.
What Was the Case About?
In the recent case of Optimares SpA v Qatar Airways Group, Optimares and Qatar Airways had agreed for Optimares to design, manufacture, and deliver seats for the customer's aeroplanes. Qatar Airways subsequently gave notice to terminate the agreement without cause, as it was entitled to do under the wording of the agreement. It also asked for a refund of all amounts paid under the agreement.
Optimares took issue with this and sued Qatar Airways, claiming that the airline was not entitled to do so, because it is qualified by a duty to act in good faith, and Qatar Airways had failed to do this.
What Did the High Court Decide?
The High Court dismissed Optimares's claim.
The natural and ordinary wording in the agreement clearly gave Qatar Airways the right to do what it had chosen to do here. There was a good faith obligation only in respect of Qatar Airways' responsibilities and obligations under the agreement. However, exercising a right to terminate was neither a responsibility nor an obligation.
What Does This Ruling Mean for You?
Each case must be determined on its own facts. What happens in any one situation will depend on what a particular contract provides. If the wording in a contract states that a right to terminate is subject to a duty of good faith, then that duty will apply. However, that was not the case here. The Court was not prepared to imply a duty to act in good faith when terminating, as the claimant had asked for.
As per the Supreme Court decision of Arnold v Britton, the courts will be slow to depart from the natural and ordinary meaning of a clause, even if this will result in unsatisfactory, or even disastrous, results for one of the parties. It is not their job to help the parties to get out of a bad bargain, where the meaning is clear and unambiguous. The parties should therefore consider their contract terms carefully and seek expert advice before entering into the contract. It is too late afterwards, and a court will not help them to escape a bad bargain.