Good Faith In NEC

• Published date: 03 August 2023
• Subject Matter: Corporate/Commercial Law, Insurance, Contracts and Commercial Law, Insurance Laws and Products
• Law Firm: Barton Legal
• Author: Mr Bill Barton

Whilst originally seen as another 'UK' based contract, NEC is now very much an international form that rivals FIDIC in its international reach.

The principle of good faith is a concept that has not yet been incorporated into English law. However, in an effort to increase the cooperation of all parties, NEC3 and 4 imply the principle by inserting a clear obligation in Clause 10. Although the specific wording "good faith" is not used within either contract, it is clear that this clause does indeed amount to a good faith obligation.

Incorporation of Good Faith into NEC

The requirement for the parties to act in a 'spirit of mutual trust and cooperation' was implemented into the NEC3 series of contract following the Latham Report, published in 1994, which stated at 5.18 that 'the most effective form of contract in modern conditions should include:- A specific duty for all parties to deal fairly with each other, and with their subcontractors, specialists and suppliers, in an atmosphere of mutual cooperation.'

NEC3 Engineering and Construction Contract ("ECC")

Clause 10.1:'The Employer, the Contractor, the Project Manager and the Supervisor shall act as stated in this contract and in a spirit of mutual trust and cooperation'

This clause creates the obligation of the Employer, the Contractor, the Project manager and the Supervisor to perform all duties and actions as stated within the contract. It is the only clause which uses the future tense and incorporates an ongoing duty throughout the performance of the contract, implying the obligation of good faith between the parties.

NEC4 ECC:

'Clause 10.1 - The Parties, the Project Manager and the Supervisor shall act as stated in this contract'

'Clause 10.2 - The Parties, the Project Manager and the Supervisor shall act in a spirit of mutual trust and co-operation'

Demonstration of Good Faith within NEC

In our webinar on 26 May 2022, Andrew Singer KC brought to our attention two cases, in which he served as counsel, that discuss the implied obligation of good faith in NEC contracts.

The case of NIHE v HBE [2014] NICA 27 concerned an appeal brought by the Northern Ireland Housing Executive ("Executive") relating to a dispute that arose out of the provision of asbestos surveying services in relation to properties belonging to the Executive, seeking a declaration that the adjudicator's decision was wrong in law.

In looking at the meaning of clause 61.1, the time bar clause, and in particular whether this was an...