Relational contracts can be identified by looking for these characteristics:

  1. no express terms preventing an implied duty of good faith*
  2. long-term contract in context of a long-term business relationship
  3. parties intend to perform their roles with integrity and fidelity to the bargain
  4. parties are committed to collaborating in performing the contract
  5. the spirit and objectives of the venture may not be capable of being exhaustively written into the contract
  6. the parties have trust and confidence in each other
  7. the contract requires high degree of communication, cooperation and predictable performance (based on mutual trust and confidence and expecations of loyalty)
  8. potentially, significant investment by one or both parties
  9. potentially, an exclusive relationship.

This list is NOT exhaustive. The only item which is determinative is the first!

The court said that B2B (commercial contracts) can be relational contracts eg a PFI contract. The impact of the contract being relational is that there is an implied duty of good faith.

What should you do?

Consider whether the projects you get involved with might result in relational contracts. Construction projects, which by their nature require long-term collaborative performance, will often be relational.

If so, you need to understand the extent of your duty of good faith.

Case: Bates & Ors v Post Office Ltd (No 3) [2019] EWHC 606 (QB) at [725, 726]

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