The recent case of Svella Connect Ltd v Virgin Media Ltd [2026] EWHC 2223 (TCC) (26 August 2026) represents a significant setback for those advocating wider implied duties of good faith in English contract law.
The courts continue to resist the tide of implied good faith (Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB)) with a clear drift towards implying terms in fact rather than in law (Ellis v John Benson Ltd [2025] EWHC 2096 (KB)).
The Technology and Construction Court's decision in Svella continues that trend. It confirms the importance of the parties' express contractual rights, the limits of the NEC obligation to act in a spirit of mutual trust and co-operation, and the court's reluctance to imply wider duties of good faith.
Svella Connect Ltd v Virgin Media Ltd [2026] EWHC 2223 (TCC) (26 August 2026)
Virgin Media entered into three NEC-based framework agreements with NMCN, which were later novated to Svella. The parties subsequently entered into an Exit & Settlement Agreement that resolved disputes under two of those frameworks and included limited commitments concerning future work.
Svella's claim originally covered a range of allegations but had narrowed by the hearing to claims based on alleged breaches of implied duties of good faith under the framework agreements and the Exit & Settlement Agreement.
The court granted Virgin Media's application for summary judgment and refused Svella permission to introduce new allegations of bad faith. Svella had abandoned all other challenged claims. The hearing therefore focused on whether duties of good faith could be implied into the contracts and whether there was any real prospect of those claims succeeding. Summary judgment was granted in Virgin Media's favour and permission to amend was refused.
The framework agreements included NEC clause 10.2 requiring the parties to "act in a spirit of mutual trust and co-operation". The court held that clause 10.2 formed part of a detailed contractual framework that already defined how the parties were required to work together. It was not a basis for imposing wider duties of good faith.
The contracts contained no guarantee of work, allowed Virgin Media to seek competitive proposals and award work at its discretion, required separate Work or Package Orders, and included termination rights, including termination for convenience. The judge concluded there was no gap in the contracts that justified implying additional duties beyond those the parties had already agreed.
Relational Contracts
Pepperall J considered both Bates and Yam Seng, but made clear that the label "relational contract" was not the deciding factor. The central question was whether the alleged implied term was necessary to make the contract work. The judge warned against treating the Bates characteristics as a checklist capable of creating good faith obligations in their own right. They are indicators only and must be considered alongside the usual principles governing the implication of terms.
The Framework Agreements were not relational in the Yam Seng sense. There was no guarantee or exclusivity of work, Virgin Media remained free to seek competitive proposals and award work at its discretion, and the contracts contained termination-at-will provisions.
The Exit & Settlement Agreement presented an even stronger case against implying duties of good faith. The court considered that settlement agreements are particularly unlikely to attract implied duties of good faith because their purpose is to resolve disputes and bring a commercial relationship, or part of it, to an end.
Where does this leave us with good faith and the NEC?
The NEC has deliberately avoided using the phrase "good faith". Following the courts' observation in Walford v Miles that a duty of good faith is "inherently repugnant to the adversarial position of the parties when involved in negotiations", the courts have nevertheless confirmed that the NEC obligation to act in a spirit of mutual trust and co-operation operates in a similar way to a good faith provision.
In the Scottish case of Van Oord UK Ltd v Dragados UK Ltd [2021], the court held that clause 10.1 was not merely aspirational but reflected and reinforced a principle of good faith within the contract. Svella shows the limits of that obligation in England and Wales. There may therefore be a distinction between the interpretation of clause 10 in the two jurisdictions, although what that means in practical terms remains to be seen.
In Svella, clause 10.2 did not override express contractual rights. Virgin Media retained the right to terminate for convenience and was under no obligation to award work until a specific order had been agreed. The obligation of mutual trust and co-operation informs how contractual rights are exercised. It does not create additional obligations that contradict the agreed allocation of risk. The decision, therefore, tells us more about what clause 10 does not do than what it does. Whilst the courts have confirmed that the clause is not merely aspirational, the precise boundaries of the obligation remain uncertain and may only become clearer as further NEC disputes come before the courts.
The judgment also reflects a wider trend in the authorities. Courts are increasingly focusing on whether a proposed implied term is necessary in light of the express contractual provisions rather than searching for broad duties of good faith based on the nature of the parties' relationship.
This approach is consistent with the Court of Appeal's decision in Portsmouth City Council v Ensign Highways Ltd [2015], which confirmed that an express obligation of good faith will generally be confined to its contractual context rather than expanded into a broader, overarching duty. Where a contract already deals with work allocation, termination, pricing, or the exercise of contractual discretion, the courts are unlikely to add obligations that the parties chose not to include. As Pepperall J made clear, the courts will not rewrite the parties' bargain or fill gaps that do not truly exist.
Likely impact on NEC Disputes
This decision places the focus firmly on the wording of the contract and the allocation of risk agreed by the parties. Arguments based on implied duties of good faith are unlikely to succeed where clause 10.2 sits alongside detailed provisions dealing with risk, termination and performance. Parties seeking broader obligations of co-operation, fairness or transparency should include them expressly and define how they are intended to operate.
The judgment suggests a narrower role for relational contract arguments than some earlier decisions appeared to permit. A long-term or collaborative relationship will not, by itself, justify the implication of wider duties of good faith. If protections are required beyond the express contract terms, they should be agreed and documented at the outset.
Svella shows that the courts will not use implied duties of good faith to improve a bargain that one party later comes to regret. Mutual trust, co-operation, and relational contracting remain relevant concepts, but the court will look first to the contract itself. Any additional obligation must be necessary, not simply desirable. For now, the authorities provide clearer guidance on what clause 10 does not require than on what it does. Whether future cases will define more precisely the scope of the obligation of mutual trust and co-operation remains to be seen.
