Bates v Post Office [2019] EWHC 606 (QB)
Facts : Group Litigation Order (GLO) comprises of appx. 550 claimants (CLs) that is mostly comprised of sub-postmasters, some Crown Office employees and managers/assistants (All employed by the Post Office (DF)). In 1999/2000 DF introduced a computerised system for accounting function in branches and between branches (Horizon Systems). All the claimants had to use the Horizon system. The software contained bugs/defects/coding errors which resulted in shortfalls and discrepancies across multiple branches. DFs blamed the CLs for the shortfalls and made the CLs prove that the shortfalls weren't their individual responsibility and failing to do so, they would have to pay the DFs the relevant sum and face consequences. Some CLs paid the Post Office and some were convicted of criminal charges for fraud, theft, false accounting. DFs claim that Horizon Systems is unable to produce errors. CLs claim malicious prosecution and that there was a cover-up for the Horizon Systems shortcomings
Issue : When is there a duty of good faith implemented into a contract?
Held : there were relational contracts which gave rise to a duty of good faith between parties
💡Leveluplaw : Is the relationship between the sub-postmaster (SPM) and the Post Office a relational contract?. It has been established in English Common Law the concept of relational contracts. The submission that the DFs made that good faith refers only to honesty ignores English case law that states otherwise. English Law does not reject a duty of good faith; however, it is not routinely applied to all commercial contracts There is a specie of contracts, relational contracts, which creates a duty of good faith between contracting parties. Must refrain from conduct in the relevant context that would be regarded as commercially unacceptable by reasonable and honest people.
📌 Characteristics of a relational contract:
No express terms in the contract that prevents an implication of a duty of good faith
A long-term contract with mutual intention of parties being bound in a long-term contract
Parties must intend their respective roles be performed with fidelity and integrity in performance of their bargain
The performance of the contract does not require commitment of collaboration between parties
The spirits and objectives of the venture may not be able to be expressed exhaustively within the written contract
Repose trust amongst one another, though different level to fiduciary relationships
Will involve a high degree of communication, co-operation, and predictable performance based on trust, loyalty and confidence
Significant investment by one (or both) parties or substantial financial commitment
Exclusivity of the relationship may be present