This claim was brought by the administrators of Phones 4u Ltd (“P4u”) which, along with Carphone Warehouse, had been one of the two major ‘indirect’ retailers of ‘connections’ to mobile networks in the UK. Those connections were sold to customers (often together with mobile handsets) on the basis of agreements with the network operators.
P4u alleged that the decision by one network provider – EE - to inform P4u that it would not be renewing its agreement after it expired was in breach of an obligation of good faith under that agreement.
The trial lasted almost 9 weeks, involved evidence from 41 witnesses and 4 expert witnesses!
The Court concluded that no general duty of good faith arose under the agreement between EE and P4u; and, secondly, that even if there was such an obligation it was not breached by the conduct of EE in sending its letter to P4u on 12 September 2014, although EE knew that the consequence was likely to be the collapse of P4u.
The case is important for further clarifying the Court’s approach to good faith and relational contracts. Every franchisor should be aware of the key “take-aways”:-
- Always have an express good faith clause in your franchise agreements;
- Take care with the drafting of your good faith clause – to make it difficult for a judge to give it an unwanted interpretation;
- Do not assume that your franchise agreement will be deemed to be a relational contract.
