Play nicely – or else

In the early months of 2017 we have seen the publication of no fewer than three forms of professional services contract (two of which have been published with accompanying subcontracts). Each of these is either entirely new or is a substantially updated version of an earlier edition. The forms in question are the ACE Professional Services Agreement (with accompanying professional services subconsultancy agreement), the IChemE Professional Services Contract (the “Silver Book”) and the fifth edition of the FIDIC Model Services Agreement (the “White Book”, with accompanying subconsultancy agreement).

The new forms of contract adopt similar approaches in response to the changing working methods required by accelerating technological and data-led progress. Two overarching requirements stand out. On the one hand, the new forms require the client and the consultant to work collaboratively, while on the other, they must comply with the prescribed procedures in relation to such matters as exchange of information.

UK consultants who work both in the UK and in civil code countries will need to be aware of the important different ramifications of a good faith obligation in the various jurisdictions

Rather than being in conflict, these two overarching requirements can be seen as two sides of the same coin. They have both been the basis of the NEC forms, including the NEC3 Professional Services Contract, for many years.

Each of the new forms deals with the overarching requirements in slightly different ways, and it will be interesting to see to what extent differences in practice and legal consequences flow from each form.

For example, as regards “collaborative working”, the FIDIC White Book and the IChemE Silver Book each have express “good faith” obligations, couched in different terms, whereas the ACE PSA (like NEC3 PSC) does not use the words “good faith” but includes a requirement “to collaborate in a spirit of trust and mutual support in the interests of the timely, economic and successful completion of the project”. The English courts have recently re-affirmed their reluctance to find an implied duty to act in good faith in the absence of an express good faith obligation. They have also considered the scope of express “good faith” obligations in a number of recent cases – for example, Portsmouth City Council vs Ensign Highways Ltd [2015]. No general rule as to the meaning of “good faith” can be deduced from these cases, since they are all fact specific. However, it is clear that the English courts are extremely reluctant to infer a requirement for a party to act against its own commercial interests. It follows that the “good faith” obligations in the FIDIC White Book and the IChemE Silver Book may not amount to much more than a requirement not to mislead the other party, besides the other express obligations to work collaboratively.

The ‘good faith’ obligations in the FIDIC White Book and the IChemE Silver Book may not amount to much more than a requirement not to mislead the other party

The position in England and Wales can be contrasted with the position in many civil law countries such as the UAE, where an overarching duty to act in good faith is imposed by the Civil Code, and is buttressed by other Civil Code principles – for example, that a party may not achieve a gain which is disproportionate to the harm that will be suffered by the other party. UK consultants who work both in the UK and in civil code countries will need to be aware of the important different ramifications of a “good faith” obligation in the various jurisdictions in which they work.

A point which is clear from the recent “good faith” cases is that it remains vital that each party complies with the contractual procedures in relation to such matters as pursuing entitlements to payment, adjustments to the programme and extension of time, and (in the case of the new ACE forms), giving early warning of any matter likely to affect provision of the services. A party which does not do so cannot rely on the other party’s obligation to act “in good faith” to protect itself from the consequences.

For example, if under the new ACE forms a consultant has failed to give early warning of any matter likely to affect the provision of the services, and the client has therefore lost the opportunity to instruct a course of action which could have saved it from incurring substantial abortive costs, the consultant could be liable for the losses incurred by the client in consequence, notwithstanding that this is not expressly set out in the new ACE forms.

It is vital that the parties to professional appointments based on the new forms fully understand and comply with their obligations. If they do, by requiring the parties to follow best current practice in relation to collaboration and process, the new forms should help map a route to success for all concerned.

Sheena Sood leads the construction, engineering and infrastructure team at Beale & Company Solicitors