Court of Appeal considers scope of all reasonable endeavours and good faith obligations

  • April 22, 2016
  • By Hunters Law

In Bristol Rovers (1883) Ltd v Sainsbury’s Supermarkets Ltd [2016] EWCA Civ 16 the Court of Appeal considered reasonable endeavours and good faith obligations under a contract.

There is no widely accepted definition of good faith, therefore its meaning is likely to vary depending on the circumstances under which the contract is agreed.

In this case, Bristol Rovers entered into a contract with Sainsbury’s supermarket which provided that completion of the agreement was conditional on Sainsbury’s obtaining planning permission that permitted deliveries at any time to their proposed store. As it happened, the Local Planning Authority granted planning permission subject to restrictions on the timing of deliveries. Sainsbury’s was obliged to the appeal the decision, however, this obligation only applied if certain conditions were met.

Sainsbury’s lodged two successive appeals, terminating the second one due to expert advice that one of the relevant conditions was not met. On the basis that the key condition of the agreement had not been satisfied, Sainsbury’s exercised its right to withdraw from the agreement.

At the first instance the judge found that Sainsbury’s was entitled to withdraw and Bristol Rovers appealed the decision based on Sainsbury’s refusal to allow Bristol Rovers to launch a further planning appeal in its own name. They stated that this was a breach of Sainsbury’s reasonable endeavours obligation to obtain acceptable planning permission and to act in good faith.

The Court of Appeal rejected this argument. Although Floyd LJ did not examine the law on reasonable endeavours and good faith in detail, he commented that all the reasonable endeavours and good faith obligations were restricted by the specific terms of the contract. In summary, if Sainsbury’s itself was not compelled to pursue a planning appeal under the terms of the contract, then it could not have been the parties’ intention that Sainsbury’s should be compelled to consent to a planning appeal by Bristol Rovers.

This case is of interest, not only to those in business but also any party to a contract. This is because the decision highlights how detailed drafting of the express terms of the contract can successfully reduce uncertainty about the scope of endeavours and good faith obligations. It also highlights that care has to be taken at the drafting stage of the contract to ensure a party is aware of its rights and obligations, including how those may affect its counter party.

For queries in relation to dispute resolution matters, please contact the partner at Hunters having responsibility for your legal matters, or (for new enquiries) please contact a member of our Dispute Resolution team.

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