Good Faith in NEC Contracts: How far does it go?

The NEC standard forms of contract are well known for requiring parties to act in the spirit of mutual trust and co-operation. But does that obligation, particularly in the context of a long-term framework arrangement, support the implication of a wider duty of good faith?

The Technology and Construction Court recently considered this question in Svella Connect Ltd v Virgin Mediation Ltd [2026] EWHC 2223 (TCC).

Background

The dispute concerned three framework agreements, in terms of which Svella Connect Ltd (“Svella”) carried out fibre optic network works for Virgin Media Ltd (“Virgin”).

The framework agreements were based on NEC’s standard terms and contained an obligation for the parties to “act in the spirit of mutual trust and co-operation”. Importantly, the framework agreements did not guarantee that Svella would carry out any particular volume of work. Instead, they provided the basis on which Svella could compete for individual packages of work.

The parties’ relationship deteriorated in 2024. Svella alleged that Virgin was applying pressure in relation to rates payable for certain works, and had reduced the volume of work being allocated to Svella. The parties entered into an Exit & Settlement Agreement in July 2024, under which Svella waived certain claims and Virgin agreed to provide further work under the framework agreements.

Following a further reduction in the works made available, Svella commenced proceedings in the Technology and Construction Court. Its claim included allegations that Virgin was in breach of implied duties of good faith arising out of the framework agreements and the Exit & Settlement Agreement.

Svella argued that the agreements were “relational contracts” and that terms should be implied to require the parties to, amongst other things, act honestly, not frustrate the purpose of the agreements, and not act in a manner which reasonable and honest people would regard as commercially unacceptable.

Virgin applied for summary judgement and/or to strike out aspects of Svella’s claim. By the time of the hearing, the key question for the Court was whether Svella had a real prospect of establishing the wider implied duties of good faith on which it sought to rely.

What did the Court decide?

The Court rejected Svella’s argument. It held that the starting point was not simply whether the framework agreements could be characterised as “relational contracts”. Instead, the Court had to consider what the parties had expressly agreed and ask whether there was a gap which required an implied term to fill it.

This was on the basis that the framework agreements were detailed commercial contracts which already extensively regulated the parties’ relationship to an agreed extent. Those contracts already dealt with matters such as co-operation, work allocation, tendering, performance and termination, and they specifically did not guarantee Svella any work.

The Court found no gap which required wider good faith obligations to be implied. To imply those obligations would risk altering, rather than supplementing, the commercial bargain which the parties had agreed. 

The Court also rejected Svella’s attempt to imply similar obligations into the Exit & Settlement Agreement. That agreement was described as a “hard-edged settlement transaction” and expressly addressed the allocation of particular risks between the parties. Again, there was no gap which required a wider duty of good faith to be implied.

What does this mean for NEC contracts?

The decision does not diminish the importance of NEC’s express obligation to act in a spirit of mutual trust and co-operation. Rather, it highlights an important distinction between enforcing that express contractual obligation and seeking to imply a separate, wider duty of good faith.

For parties entering into NEC framework agreements, this is also a useful reminder of the importance of express contractual terms. If parties intend there either to be a minimum volume of work, restrictions on the allocation of work, or particular restrictions as to how the contract will be exercised, those should be expressly stated in the contract.

Ultimately, labelling a long-term commercial arrangement as “relational” will not allow a party to circumvent the bargain it has made. As Svella demonstrates, the courts will look first to what the parties have actually agreed and ask whether there is any need for an additional implied obligation of good faith.

For more information on NEC contracts and framework agreements, please contact a member of our construction and engineering team.