The court implied a duty to act in good faith into a contract on the basis of it being relational. This was defined as "refrain from conduct which in the relevant context, would be regarded as commercially unacceptable by reasonable and honest people" and an obligation of "transparency, co-operation, and trust and confidence".
What is a relational contract?
- There are no express terms that prevent the implication of a duty of good faith.
- The contract is mutually intended to be long term.
- The parties must intend their roles to be performed with integrity and fidelity to their bargain.
- The parties will be committed to collaborating with one another in performing the contract.
- The spirits and objectives of their venture may not be capable of being expressed exhaustively in a written contract.
- Each party will place trust and confidence in the other, but of a different kind to a fiduciary relationship.
- The contract will involve a high degree of communication, co-operation and predictable performance based on mutual trust and confidence, and expectations of loyalty.
- There may be a high degree of significant investment, or a substantial financial commitment, by one or both parties.
- The relationship may be exclusive.