This case relates to a franchise agreement. Judgement was handed down on 6 August 2025. English courts are continuing to struggle with the extent to which duties of good faith should be implied into franchise agreement.
It appears that the previous “debate” about whether relational contracts – long term agreements which require the parties to work together to achieve the commercial objective of the agreement – should, as a matter of law, be subject to implied obligations of good faith. The better view, supported by this case, appears to be that such an obligation will only be implied if the facts require it and so it will not be automatic.
The court had to consider a franchise agreement that was onerous and contained unusual provisions. Further, the franchisor had behaved in an aggressive and intimidatory way towards its franchisees.
The court decided that the duty of good faith included obligations:
- not to substantially deprive franchisees of the benefits of the contract
- not to undermine the terms of the bargain
- not to exercise discretion arbitrarily or capriciously
- to refrain from conduct that would be regarded as commercially unacceptable by reasonable and honest people
- not to act, without reasonable or proper cause, in a way likely to seriously damage the relationship of mutual trust and confidence
John Pratt, IDI Country Expert for Franchising in the UK
Link to the judgement: ELLIS V JOHN BENSON LIMITED [2025] EWHC 2096 (KB)
