Aston Martin and the duty of good faith

This dispute between Aston Martin and AMMENA, its distributor in the MENA region, began when AMMENA terminated the Agency Agreement between them. The parties subsequently brought debt claims against each other. The case is relevant for businesses beyond the automobile sector, as it examines the scope and content of express and implied duties of good faith in commercial contracts.

Express term

The court applied the principles of contractual construction to determine which express duties of good faith in the Agency Agreement continued to operate during the transition period, which started after AMMENA terminated the Agency Agreement. The court concluded that not all the express duties contained in the Agency Agreement applied during the transition period (e.g. those that arose on no fault termination on notice did not apply as a matter of interpretation to termination for breach).

Implied term?

AMMENA argued that there were implied terms that Aston Martin would act in good faith during the transition period. The court rejected this, finding that both alternatives did not meet the strict criteria set by the Supreme Court in Marks & Spencer: they were not “necessary to give business efficacy”to the Agency Agreement nor had it been shown in either case that “without the term, the Agency Agreement would lack commercial or practical coherence”.

Content of duty

The court reviewed the case law, including the recent Court of Appeal decision in Re Compound Photonics. It confirmed that there is no single legal test for the content of a duty of good faith and that the exercise of constructing the contract is not determined by the type of contract, it is always a matter of context. Ultimately, the court found that Aston Martin had no duty to “have regard to the effect of its actions on AMMENA”.

Judgment: Aston Martin MENA v Aston Martin Lagonda