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NEC v JCT: mutual trust and co-operation v good faith and spirit of trust and respect?

On Tuesday evening, Kings College London hosted the KCCLA and Sweet & Maxwell Twelfth Annual Lecture: NEC v JCT – Same problems different solutions.

The lecture was delivered debate style, with Mr Justice Ramsey chairing speakers on behalf of the JCT (Peter Hibberd and Peter Aeberli) and NEC (David Thomas QC and Dr Jon Broome). The speakers battled it out to convince the audience which was the better contract, covering a variety of issues.

The arguments for each form

The speakers cited the usual suspects for NEC, such as ease of use; clarity and flexibility; and a useful stimulus to better project management. On the JCT side, Peter Hibberd extolled the virtues of the JCT‘s history; proven track record; and the fact that its drafting is based on the consensus of many industry parties.

Mutual trust and co-operation: what does it mean?

One of the debated issues I found interesting was that of the “mutual trust and co-operation” wording in NEC versus the new optional Schedule 8 wording in JCT, which says the parties must work with each other and the project team in “good faith and a spirit of trust and respect“.

What does it all mean I wondered? Can the parties successfully claim for breach of this obligation? If so what would the remedies be?

NEC: Australian authority

The NEC team argued that a “mutual trust and co-operation” obligation would be enforceable, and referred to the wealth of Australian authority on this point. It may seem obvious, but David Thomas explained that he sees mutual trust as acting in a trustworthy way, being able to trust the other party and having regard to the other party’s interests, but not having to put them above your own.

He explained that as the NEC wasn’t as detailed in some place as it might be, the overarching mutual trust obligation was well suited to that form.

JCT response: box ticking?

The JCT team’s response was that the NEC, by including the mutual trust obligation, had merely carried out a “box ticking” exercise as a nod to the Latham report. They argued that all it does is create uncertainty.

JCT’s approach was to clearly set out the obligations in relation to each matter. So, for example, JCT clearly states that notice of termination should not be given “unreasonably or vexatiously” so there’s no need for any overarching “mutual trust” wording.

But wait just one minute…

Hang on though. Haven’t the JCT introduced some wording along very similar lines as that in the NEC? Optional Schedule 8 says the parties must work with each other and the project team in “good faith and a spirit of trust and respect”.

Surely this takes us back to the same question of what does it all mean? Why did JCT feel the need to include this if their contracts already deal with each obligation clearly?

Well, we may all be left considering the meaning of it all, but the wording is in both the JCT (albeit optional) and the NEC, and there to stay for now at least.

I’m still left wondering though whether a party could successfully claim for breach of these “good faith” type obligations, and if so, what might the remedy be…

10 thoughts on “NEC v JCT: mutual trust and co-operation v good faith and spirit of trust and respect?

  1. I thought that the lecture was a very interesting and entertaining event and this first question the highlight of those put to the panel.

    As the debate commenced I recalled that insurance contracts have for many years contained an over-arching doctrine of “Uberimae fides” or “Utmost good faith”. In this case; should an insurance proposal not contain all known and relevant facts through the duty of “disclosure” an insured may not recover all their losses in the event of an insured risk occuring.

    Compare this position with the “good faith” obligations in most current standard – form construction contracts and the comparison is an interesting one possibly worthy of a dissertation on the MSc at Kings?! All comments very welcome! Regards David Hutchens

  2. I know it’s a Contract, and we should know what the terms actually mean, but from a practical position, it is very useful to have the mutual trust provision there. It sets a tone and surprisingly, I believe makes a difference. So don’t you lawyers do away with it coz you can’t make sense of it…please

  3. As always with KCCLA evenings the event was excellent, and thanks must to go all who organised and supported the event as well as the panel who provided and informed and informative debate.
    It was clear to me that the panel was of the impression that the audience was made up of lawyers. I am sure

  4. I wrote an article for one of Fenwick Elliott’s publications a few years ago in which I reviewed some of the decisions of the higher courts on breaches of the implied terms as to trust and confidence in employment contracts. I queried whether some of these decisions might have a bearing upon the “mutual trust and cooperation” provisions in the NEC. In the employment scenario, a proven breach of this term could bring the contract to an end with damages for the lost benefits to the victim. One wonders whether, if a party to an NEC contract sought to rely upon a breach of this term, the remedy sought might not be along these lines.

  5. Most terms in contracts are ambigious, perhaps this is down to humans pluarity, the important although unspoken point here is that wouldn’t it be a worse world if the contracts stated no mutual trust and unco-operation or bad faith and spirit of untrust and disrespect – it may seem silly but is it really? Could they be left out, yes – does it make the contracts any less robust without them, well no. As was also mentioned on the night it is never really about the contracts but the people managing the projects and it is those very people that, at times and at least for there party wish very much for mutual trust and co-operation / good faith and spirit of trust and respect.

  6. The issue of good faith has generated a fair amount of commentary over the years as well as several King’s MSc dissertations (including mine) which provide varying degrees of support to that type of obligation. I think the best we have had from the courts are the comments on partnering in Birse v St David back in 1999.

    I suspect the uncertainty means it is unlikely anyone will base a claim solely on this point, but it could be an interesting side issue. What seems clear is that good faith obligations are unlikely to prevent strict contractual rights from being enforced, so, for example, the NEC time bar will still be enforced even if there is just a day’s delay and no real prejudice.

    Good faith may however make a difference where one party can take action to help the other but is not obliged to under the contract. There could be an argument that acting in the spirit of mutual trust and cooperation means an obligation to, for example, re-sequence works where practically possible to help the other party. It may also mean an obligation to disclose useful information one party has (e.g. knowledge of local planning issues, site investigation reports etc.), even if there is no express duty to disclose such information under the contract.

    In other words, an obligation to be pro-active, to be flexible and to help the other party if there are practical options (but probably only if there is little or no cost impact).

    The growing use of NEC, and JCT’s adoption of a similar obligation, make it more likely this will be a practical issue in the future. It would be interesting to know if the argument has been raised in adjudications.

  7. Mutual trust, co-operation and good faith are not borne out of contractualisation – they are the product of sensible procurement and good contract administration; i.e. selecting a trustworthy, competent, experienced and well resourced contractor who appreciates the risks imposed on him and then, importantly, paying the correct price for the job. Once you’ve done that, you need to apply good project management together with equally skilled, experienced and well resourced contract administration.

    It has always felt rather hollow to me that JCT, as the purveyors of the design and build contract which has done so much to create the adverserial contracting culture of high risk, low cost and mutual mistrust, have been peddling mutual trust and co-operation? The problems cannot be addressed by a few warm words. A cynic may view this as the JCT trying to feel its way into NECs monopoly on OGC contracts.

    Ultimately, it’s about getting it right in practice – if a tiger signs a contract agreeing to be a leopard, he’s still a tiger. If you want a leopard, choose, and pay, for a leopard.

  8. I came late to this discussion. In the days when I was a member of the IEE/IMechE/ACE group on the MF Series of forms, I once commented on the paucity of jurisprudence on the Contracts. I was soon told that these specialist contracts were made with very much better profit margins, as a result of which disputes rarely arose – the manufacture/contractor was often able to absorb some costs. Good faith is easier when there is margin in hand.

  9. I have come in very late to this discussion. I am currently undertaking a research project for university to evaluate if Clause 10.1 of the NEC is an effective and enforceable term. Could you please spare two minutes of your time to complete this online questionnaire. Please enter the link below into your address bar:

    Thanks in advance.

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