Good faith will not override contractual provisions

In a recent case, Bristol Rovers (1883) Ltd v Sainsbury’s Supermarkets Ltd [2016] EWCA Civ 160, the Court of Appeal looked at the scope of obligations to act in good faith and use all reasonable endeavours in relation to planning permission applications.

Facts

  • Sainsbury’s entered into a conditional contract with Bristol Rovers for the sale of the Bristol Rovers’ stadium but, as economic conditions changed, Sainsbury’s sought to terminate the contract. 
  • The contract was subject to a number of conditions, in particular that Sainsbury’s applied for and received planning permission for deliveries 24 hours a day.  This condition was not satisfied as planning permission was granted with time restrictions.  Although Sainsbury’s initially appealed, it withdrew those appeals on legal advice and exercised its right to terminate the contract. 
  • Sainsbury’s was under a contractual obligation to use all reasonable endeavours to procure acceptable planning permission and to act in good faith in relation to those obligations.
  • Before Sainsbury’s terminated, Bristol Rovers asked Sainsbury’s to give permission to file planning permission in Bristol Rovers’  name. Sainsbury’s refused.
  • One of the main issues before the court of appeal was whether Sainsbury’s was able, as they had done, to refuse Bristol Rovers’ request to submit a planning application.

Decision

  • The Court rejected Bristol Rovers’ argument that Sainsbury’s was obliged under the contract to use “all reasonable endeavours” to procure an acceptable planning permission as soon as possible.   Bristol Rovers argued that this meant that Sainsbury’s was required to give consent to Bristol Rovers filing an application in its own name for planning permission in circumstances where Sainsbury’s itself would not be obliged to do so.  The Court rejected this argument.
  • Although the contract contained an obligation for both parties to act in good faith in relation to their respective obligations under the contract, this did not give rise to a positive obligation for Sainsbury’s to consent to Bristol Rovers’ application for planning permission.  Bristol Rovers had no obligation at all under the contract to make an application for store planning permission.

Comment
Whilst the law surrounding good faith and reasonable endeavours wasn’t examined in detail, the case demonstrates the importance of detailed drafting in relation to specific obligations under a contract.  In the absence of specific obligations, the Courts will not be sympathetic to parties arguing that general “reasonable endeavours” or “good faith” wording can be read as a substitute for express contractual provisions. 

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