Background
Virgin Media used framework contractors to build and expand fibre networks. Three framework agreements originally made with NMCN plc were novated to Svella Connect after NMCN entered administration. The agreements contained an express obligation to act in a spirit of mutual trust and co-operation, but did not guarantee Svella any work, permitted Virgin Media to seek competing bids and award orders as it chose, and allowed termination at will or for convenience.
After relations deteriorated, the parties entered an Exit & Settlement Agreement in July 2024. Svella waived disputed claims under two Morpheus framework agreements, while Virgin Media agreed to grant specified work under the Lightning agreement subject to governance, performance and project-approval qualifications. Nexfibre subsequently reduced its plans, materially lowering the volume expected to proceed.
Svella sued on numerous grounds, including alleged implied duties of good faith in the framework and settlement agreements. It later abandoned most challenged claims, withdrew its 187-page Reply and sought permission to replace its original good-faith allegations. Virgin Media sought summary judgment or strike-out, leaving the viability of the implied-good-faith case as the principal issue.
The Court’s Holding
Mr Justice Pepperall granted Virgin Media summary judgment on the claims for breach of implied duties of good faith. The governing inquiry was not simply whether an agreement could be labelled “relational,” but whether, under orthodox principles for implying contractual terms, the express bargain left a gap and the proposed term was necessary for business efficacy or so obvious that it went without saying. The relational-contract indicators identified in earlier authority were useful only as a sense-check.
The detailed framework agreements left no relevant gap. They expressly regulated co-operation, performance oversight, improvement plans, suspension and work allocation, while making clear that Svella had no guaranteed work or exclusivity and that Virgin Media retained substantial freedom over awards and termination. The court held that the agreements were not relational in the relevant sense and that the pleaded duties could not be implied either in fact or in law.
The case was still weaker under the Exit & Settlement Agreement, a carefully negotiated, qualified settlement designed largely to end a troubled relationship. Its express reasonable-endeavours provision and other caveats could not be supplemented by a broad implied duty without rewriting the bargain. The proposed new breach particulars also had no real prospect of success: some duplicated express contractual claims, some alleged only contemplated conduct and disclosed no completed cause of action, and others concerned matters already governed by detailed express terms. Svella received permission to amend in accordance with its second draft except for the proposed particulars in Appendix 2.
Key Takeaways
- Calling a commercial agreement “relational” does not itself justify implying a duty of good faith; necessity under orthodox implied-term principles remains central.
- A court will not imply good-faith obligations where detailed express provisions already govern the disputed conduct or where the proposed term conflicts with negotiated rights and limitations.
- Good-faith allegations must identify a viable implied term and a completed, properly particularised breach; they cannot merely duplicate express contract claims or challenge conduct the contract permits.
Why It Matters
The judgment reinforces a restrained approach to implied good-faith duties in English commercial contracts. The court treated the Bates relational-contract factors as a diagnostic aid, not an alternative legal test, and focused first on the language and completeness of the parties’ express bargain.
For parties using framework, infrastructure and settlement agreements, the decision underscores that express provisions on work allocation, discretion, performance management, termination and reasonable endeavours will usually control. Broad allegations of commercial unfairness cannot override those negotiated terms.