Unearthing the implicit duty of cooperation in commercial contracts

In the world of business, contracts are the bedrock upon which deals are built. These carefully crafted documents are a testament to the mutual understanding between parties, outlining their respective roles and responsibilities in detail.

There also exist critical implicit elements that underpin the commercial relationship; the ‘implied terms’. One of these is the implied duty of cooperation. The classic summary of this duty dates back to an historic Victorian case from 1881, where the judge commented that “…where in a written contract it appears that both parties have agreed that something shall be done, which cannot be effectually done unless both parties concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect.”

In other words if the performance of the contract cannot take place without the cooperation of both parties, it is implied that the parties’ cooperation will be given. This duty of cooperation isn’t just a legal technicality – it’s grounded in a fundamental truth. Contracts are not static pieces of paper; they are living, breathing agreements that must adapt to unforeseen circumstances. This is where cooperation becomes indispensable. This duty encompasses being open, sharing essential information, and working collaboratively to overcome the challenges that may arise during the contract’s lifespan.

Courts meticulously examine the behaviour of the parties involved. Have they made genuine efforts to work together and resolve issues before resorting to litigation or arbitration? If not, they may find themselves facing legal consequences for breaching this implied duty.

Of course, the extent of cooperation isn’t a one-size-fits-all concept. It varies depending on the specific contract and industry in question. However, in most cases, it entails maintaining transparent lines of communication, promptly sharing critical information and actively seeking mutually acceptable solutions when obstacles arise. This duty holds particular significance in long-term contracts, where ongoing collaboration is the linchpin of success.

A good example of how this works out in real life is in the relationship between a building contractor and a sub-contractor. It’s evident that they must cooperate, as construction projects cannot progress without it. However, the level of cooperation is dictated by what their contract stipulates. The sub-contractor can’t be compelled to perform tasks the contract excuses them from, nor can they be expected to achieve the impossible. Similarly, there’s no duty to cooperate in areas where the contract does not explicitly require it.

In essence, the implied duty of cooperation is the hidden ingredient that spices up many commercial contracts. It underscores the value of collaboration, transparency and adaptability in business relationships. Those who wholeheartedly embrace this duty are better equipped to tackle challenges, nurture robust partnerships and uphold the integrity of their contractual commitments.

It’s important to note that there are limits to the law’s power in enforcing cooperation. Legal measures can only compel cooperation to the extent necessary to make the contract function as intended. Any additional cooperation hinges on the shared desire of both parties to see the business venture through, transcending the strict confines of the law.

In conclusion, the implied duty of cooperation is a silent force that shapes the landscape of commercial contracts. It underscores the importance of working hand in hand, transparently sharing information and adapting to unforeseen circumstances in the ever-changing world of business. It’s not just about fulfilling a legal obligation – it’s about getting the job done, together.

If you have any questions relating to contracts or any other commercial query, please don’t hesitate to contact our expert team.

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