Ketchup Case Squashed!

In March of last year, the courts held that a hospital trust's conduct to its contractor was so unreasonable that it was in breach of the express duty to act in good faith in their contract, and this amounted to a repudiation of the contract. While the case turned on its own facts, a number of long term contracts, particularly in PFI/PPP do include such an obligation of good faith, and the decision had served as a warning that extreme behaviour (in this case by the NHS Trust) could be interpreted as a repudiatory breach.

However, the decision has recently been overturned, with the Court of Appeal finding that the original judge had taken the wrong approach to the good faith obligation contained within the contract (Compass Group UK and Ireland Ltd (trading as Medirest) v Mid Essex Hospital Services NHS Trust [2013] EWCA Civ 200).

By way of reminder, the contract in question concerned provision of catering and cleaning services by Medirest to the Trust. Under clause 3.5 of the contract the parties were obliged to co-operate in good faith: "3.5 The Trust and the Contractor will co-operate with each other in good faith and will take all reasonable action as is necessary for the efficient transmission of information and instructions and to enable the Trust or, as the case may be, any...