Most Read Contributor in Hong Kong, September 2016
Keywords: good faith obligations, commercial
The general position of good faith negotiations in English law
is stated in Cobbe v. Yeoman's Row Management Limited 
EWCA Civ 1139. Under English law, there is no general duty to
negotiate in good faith. However, in a recently delivered judgment
by Mr Justice Coulson in the Technology and Construction Court in
the case of Jacobs UK Ltd v. Skidmore Owings & Merrill LLP
 EWHC 3293 (TCC), the increasing influence of obligations of
good faith is highlighted.
The court distinguished the case on its special facts from
Cobbe. The subject matter of the decision in Cobbe concerned the
negotiations to enter into an agreement, in which the negotiating
parties were not subject to a duty to negotiate in good faith. In
Jacobs, what was in issue was the parties' mutual commercial
conduct under an agreement to award contracts. Although the
agreement to award contracts was dependent on the parties'
negotiations in respect of particular contracts, the agreement was
still enforceable as it worked like a framework agreement, under
which each separate contract must be negotiated. The court held
that there were general obligations of good faith on both sides in
the process of negotiating particular contracts in order to make
the agreement work:
"SOM [the Defendant] had to consider awarding contracts and
Jacobs [the Claimant] had to consider accepting such awards, both
in good faith. Only when an agreement was reached in good faith
could there be an award of a contract."
The court in the present case considered that there was no need
for implied terms to achieve a mutual duty of good faith. This was
because under the agreement, the parties' obligations and
consequences were plain. The Defendant was obliged to consider
awarding a contract to the Claimant, which in return was obliged to
respond positively. Although the obligation to negotiate in good
faith was not expressly stated in the agreement, the parties'
mutual commercial conduct obviously entailed good faith obligations
in order to make the agreement work.
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
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The process for obtaining planning permission for development of property in the Cayman Islands has been updated as a result of the latest revision of the Development and Planning Law and accompanying regulations (July 2015).
In principle, when the parties agree to arbitrate, they shall be
bound by that agreement. It should therefore follow that when a
party initiates arbitration proceedings, the other party - the
respondent – will avail itself of the opportunity to present
its case and participate in the proceedings.
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