CAN GOOD FAITH BE IMPLIED INTO DETAILED FRAMEWORK AND SETTLEMENT AGREEMENTS?
In Svella Connect Ltd v Virgin Media Ltd [2026] EWHC 2223 (TCC), the English Technology and Construction Court considered whether duties of good faith could be implied into detailed framework and settlement agreements.
The background. Virgin Media Ltd (“Virgin Media”) used contractors operating under framework agreements to expand fibre optic networks in the United Kingdom. Three framework agreements were originally entered into with NMCN plc (“NMCV”) and were novated to Svella Connect Ltd (“Svella”) after NMCN entered administration (Judgment [6]–[8]).
The work allocation process began with an annual “Opportunity Plan”. Virgin Media then negotiated provisional allocations with framework contractors. Actual work depended on further approvals, design work and the issue of individual orders. Historically, contractors did not always receive all the work that had been provisionally allocated (Judgment [9]–[11]).
The parties later entered into an Exit & Settlement Agreement. Svella waived claims relating to two of the framework agreements, while Virgin Media agreed to award further work under the remaining agreement on the terms set out in the settlement (Judgment [15]).
Svella alleged that duties of good faith should be implied into both the framework agreements and the settlement agreement, which included obligations to act honestly, not to frustrate the purpose of the contract and not to act in a manner that reasonable and honest people would regard as commercially unacceptable (Judgment [16], [18]).
Virgin Media denied that there was any basis for implication. It relied on the express terms, including the absence of any guarantee that work would be placed with Svella and its rights to use alternative contractors and terminate the framework agreements (Judgment [19]–[21]).
Implication is not a fairness exercise. The court started with the express contract. Only after construing the words chosen by the parties could it consider whether an additional term should be implied (Judgment [56]).
For a term implied in fact, the conventional requirements include that the term must be reasonable and equitable, necessary to give the contract business efficacy, sufficiently obvious, capable of clear expression and consistent with the express terms (Judgment [61]).
The court stressed that hindsight can be misleading. A dispute usually reveals a problem that the parties did not address expressly. That does not permit a court to write the solution that now appears fairest. It is not enough that the parties might have wanted to address the issue if they had foreseen it (Judgment [62]–[63]).
Nor is it enough that the proposed term would improve the contract. Necessity must not be diluted, and an implied term cannot rewrite the agreement or contradict an express provision (Judgment [63]–[66]).
This is an important practical point. A party may consider the other side’s conduct unreasonable, damaging or inconsistent with the commercial relationship. However, those concerns do not, by themselves, establish the contractual gap needed for implication.
Calling a contract “relational” is not a shortcut. Svella relied on the idea that its agreements were relational contracts involving long-term cooperation, communication, trust and confidence (Judgment [16]).
The court accepted that factors such as duration, collaboration, trust, investment and exclusivity may help to assess the character of the relationship. However, those factors are only a “sense-check”. They do not replace the usual test for implying a term (Judgment [73]–[77], [82]–[88]).
The critical question was not simply whether the parties had a continuing commercial relationship. It was whether their agreement was incomplete and, if so, whether the particular good faith obligations pleaded by Svella were necessary or obvious (Judgment [83]–[85]).
The court also noted that relatively few claimants had succeeded after seeking to characterise their contracts as relational. Not every long-term cooperative arrangement carries an implied obligation of good faith (Judgment [76]–[77]).
Detailed drafting left no gap to fill. The court found that the framework agreements were detailed commercial contracts based on NEC standard terms and each ran to more than 200 pages. They already required the parties to act “in a spirit of mutual trust and co-operation” (Judgment [90]).
At the same time, the agreements contained clear commercial qualifications. They did not guarantee any work or exclusivity. Virgin Media could seek competitive quotations, award orders as it saw fit, and “had an apparently unfettered right to terminate the Framework Agreements under clause 26.2” on top of the right to terminate for convenience for notice (Judgment [91]–[93]).
The court held that the express cooperation wording did not override those provisions. Rather, it formed part of the same contractual package. The court therefore found no gap that made Svella’s additional good faith duties necessary or obvious (Judgment [94]–[95]).
Applying the relational-contract factors as a sense-check led to the same conclusion. The court held that the arrangements were not especially long-term, were terminable at will or for convenience, imposed no obligation on either side to offer or accept work, and already regulated cooperation expressly (Judgment [97]–[105]).
The court therefore concluded that the framework agreements were not relational contracts in the relevant sense. More importantly, even proof that an agreement was relational would not automatically create duties of good faith. Necessity remained the touchstone (Judgment [112]–[114]).
The court held that proposed terms were even less tenable for the Exit & Settlement Agreement. It was a “carefully negotiated settlement intended to end a troubled relationship.” Its express reasonable endeavours obligation concerning replacement work left no room for a further implied obligation (Judgment [115]–[116]).
The court characterised that agreement as a “hard-edged settlement transaction and not some broader arrangement where parties were yet to work out how they might collaborate together.” There was no identified gap and no expectation of mutual trust, confidence or loyalty (Judgment [119]–[129]).
The same reasoning applied to Svella’s complaints about performance management. The contracts contained detailed provisions governing service levels, audits, monitoring, performance improvement plans, suspension and step-in rights. An additional good faith duty would have rewritten that agreed machinery as “[t]he implication of such a term would be to rewrite the parties’ contract which was to use a touchstone of reasonableness and agreed Service Levels” (Judgment [136]–[138]).
Virgin Media was therefore granted summary judgment on the claims for breach of the alleged implied duties of good faith (Judgment [141]).
What this means for construction professionals in Singapore. While this is an English judgment, it is relevant to note that this case shows how difficult it can be to imply a term of “good faith” when there is a detailed set of terms and conditions regulating the parties’ respective rights and obligations.
There are also some practical drafting points which springs to mind.
Do not assume that language requiring “mutual trust and co-operation” will override clear provisions on work allocation, exclusivity, payment, performance assessment or termination.
If good faith is intended to control a particular decision, identify the decision and the required standard.
Deal expressly with important operational expectations.
Good faith wording may add little if other clauses confer broad rights to withhold work, procure from others or terminate for convenience. If those rights are meant to be qualified, the qualification should be written into the relevant clause.
Construction parties should identify the cooperation they need and express it through precise obligations that fit with the contract’s existing risk allocation and project machinery. Resorting to implying an obligation of “good faith” to try and “repair” a contractual machinery can be difficult, and, even if possible, may run into issues where other express terms may have qualified the room for such an obligation to operate.
This publication is not intended to be, nor should it be taken as, legal advice; it is not a substitute for specific legal advice for specific circumstances. You should not take, nor refrain from taking, actions based on this publication. Chancery Law Corporation is not responsible for, and does not accept any responsibility for, any loss or damage that may arise from any reliance based on this publication.