This year, in the high profile dispute between the Post Office and many of its sub-postmasters, Fraser J considered what characteristics might signify that a contract is “relational”.
Having explained that the “circumstances of the relationship, defined by the terms of the agreement, set in its commercial context, is what decides whether a contract is relational or not” at paragraph 725 of a lengthy judgment Fraser J set out the characteristics which he felt were relevant when considering whether or not a contract was a relational one or not:
- “There must be no specific express terms in the contract that prevents a duty of good faith being implied into the contract;
- The contract will be a long-term one, with the mutual intention of the parties being that there will be a long-term relationship;
- The parties must intend that their respective roles be performed with integrity, and with fidelity to their bargain;
- The parties will be committed to collaborating with one another in the performance of the contract;
- The spirits and objectives of their venture may not be capable of being expressed exhaustively in a written contract;
- They will each repose trust and confidence in one another, but of a different kind to that involved in fiduciary relationships;
- The contract in question will involve a high degree of communication, co-operation and predictable performance based on mutual trust and confidence, and expectations of loyalty;
- There may be a degree of significant investment by one party (or both) in the venture. This significant investment may be, in some cases, more accurately described as substantial financial commitment;
- Exclusivity of the relationship may also be present.”
Fraser J explained that the list is not to be considered exhaustive and that none of the characteristics are determinative (the exception to this being where a term expressly prevents the implication of a duty of good faith – that, he said, will be the end of the matter). However the list does give a flavour of the sorts of relationship which are most likely to be considered relational ones.
What does good faith mean? Where good faith (sometimes called “fair dealing”) is implied into a contract, the judge is of the view that it:
“does no more than require a party to refrain from conduct which in the relevant context would be regarded as commercially unacceptable by reasonable and honest people”.
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