An Investors and Shareholders agreement was not subject to an implied of good faith.
Sheffield United (the club) claimed that UTB acted contrary to the terms of the Investors and Shareholders Agreement (ISA) between them and contrary to UTB’s duty of good faith and obligation to work fairly and in cooperation with the club.
There were no express good faith obligations in the ISA or the relevant articles of association. However, as the parties relationship was akin to a joint venture the club argued that the ISA was a relational contract. This, said the club, meant that as a matter of law a term should be implied obliging each party to deal fairly and act in good faith towards the other.
The court disagreed. In its view, good faith would only be implied as a matter of fact (and not automatically as a matter of law because the contract was a joint venture). Some joint venture arrangements might require the term to be implied, it said, but on the facts this was not such a case.
Rather than consider the list of characteristics which would support an analysis of whether or not the agreement was relational, the court preferred to ask “whether a reasonable reader of the contract would consider that an obligation of good faith was obviously meant or whether the obligation is necessary to the proper working of the contract".
It concluded that in this case the relationship could function perfectly well without the implied term. The ISA was sophisticated and well drafted and the parties were companies operating through limited companies. What’s more, if deadlock was reached on decision making then the parties had expressly agreed to resolve the deadlock “in good faith". It was certainly arguable, thought the court, that by expressly requiring the parties to act in good faith in particular, limited, circumstances the intention of the parties was that a good faith obligation should not apply more generally.