Good faith in construction: English and Middle Eastern Perspectives

Although famously prone to disputes, in many ways construction projects are inherently collaborative. Employers, contractors, consultants and subcontractors generally work together over extended periods whilst navigating issues such as variations, extensions of time and other potential unforeseen conditions.

In that context, questions of good faith frequently arise, particularly in areas such as contract administration, the valuation of variations, extensions of time and termination rights. Although there is no universally accepted definition, good faith is generally associated with honesty and the avoidance of opportunistic conduct.

The recent decision in Svella Connect Ltd v Virgin Media Ltd [2026] EWHC 2223 (TCC) provides a timely reminder of the limited role of good faith under English law. It also invites comparison with many Middle Eastern jurisdictions, where good faith is expressly recognised in legislation.

The distinction is particularly relevant to construction and arbitration in the region, where English legal practice often intersects with local laws that approach good faith from a different starting point.

The English law position

English law does not recognise a general duty of good faith in commercial contracts. Instead, it has traditionally adopted what Bingham LJ described in Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6 as “piecemeal solutions in response to demonstrated problems of unfairness”.

That approach reflects English law’s emphasis on contractual certainty. The courts will generally enforce the bargain struck by the parties rather than impose broader notions of fairness or cooperation. In Walford v Miles [1992], for example, the House of Lords rejected a general obligation to negotiate in good faith.

Good faith can nevertheless affect an English law contract in several ways. First, the parties may expressly agree to act in good faith. The scope of such an obligation depends on the wording and context of the contract. In CPC Group Ltd v Qatari Diar Real Estate Investment Company [2010] EWHC 1535 (Ch), an express obligation of good faith was described as requiring the parties to “adhere to the spirit of the contract, to observe reasonable commercial standards of fair dealing, [and] to be faithful to the agreed common purpose”. The impact of such an obligation may, however, be more limited than parties imagine, and it will not ordinarily override more specific contractual provisions or prevent the exercise of clearly expressed contractual rights.

Second, good faith may operate as a constraint on the exercise of certain contractual discretions under English law. In Braganza v BP Shipping Ltd [2015] UKSC 17, Lady Hale explained that a contractual decision must be made “rationally (as well as in good faith) and consistently with its contractual purpose”. The precise scope of the implied constraint will depend on the terms and context of the particular contract.

Third, obligations associated with good faith may arise as implied terms. In Yam Seng PTE Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB), Leggatt J recognised that duties of honesty and fair dealing may be implied in appropriate circumstances. He considered that there was “no difficulty, following the established methodology of English law for the implication of terms in fact, in implying such a duty in any ordinary commercial contract based on the presumed intention of the parties”. He emphasised, however, that “what good faith requires is sensitive to context”.

More recently, in Svella Connect Ltd v Virgin Media Ltd [2026] EWHC 2223 (TCC), the High Court reaffirmed the orthodox approach. The fact that a contract may have relational characteristics does not itself give rise to a duty of good faith. Any such duty must satisfy the established requirements for the implication of terms in fact.

Middle Eastern approaches

Many Middle Eastern legal systems adopt a different starting point. Rather than treating good faith as a limited or context-specific obligation, it is commonly recognised in legislation as a general principle governing contractual performance.

In Egypt, Article 148 of the Civil Code provides:

“A contract must be performed in accordance with its terms and in a manner consistent with the requirements of good faith.”

The provision also recognises that a contract binds the parties not only to its express terms, but also to obligations arising from law and equity that are a necessary consequence of the contract.

A similar approach is found in the UAE Civil Transactions Law (Article 221(1)). In fact, the Civil Transactions Law expressly extends the principle of good faith to the pre-contractual stage. Article 121(1) provides: that “The initiation of pre-contractual negotiations, their conduct, and their termination shall be in accordance with the requirements of good faith.”

Article 121(3) goes on to provide for liability to compensate on the party that negotiates or terminates negotiations in bad faith.

Saudi Arabia has also expressly codified the principle of good faith. Article 95(1) of the Civil Transactions Law provides that “A contract shall be implemented as per its provisions and in a manner consistent with good faith practices.”

The provisions reflect the influence of civil law traditions and are similar to the position in many European jurisdictions (and others internationally which share this legal heritage). It is interesting to note, for example, that almost identical provisions to those set out above are found, for example, at Article 1258 of the Spanish Civil Code.

In the Middle East, however, these principles are also influenced, to varying degrees, by Islamic legal principles. Concepts such as honesty and trustworthiness have long formed part of Islamic jurisprudence. The precise relationship between those principles and codified duties of good faith varies between jurisdictions.

Saudi Arabia provides an example of their continuing relevance within a codified framework. Article 1 of the Civil Transactions Law provides that, where neither the provisions of the Law nor its General Rules apply, “the provisions derived from Sharia that are most consistent with this Law shall apply”.

Relevance to construction projects

In the specific context of construction, good faith is often invoked in the context of one party seeking to apply the strict wording of a contract, and the other protesting that such an application causes injustice. This is often related to notifications which, under many international standard form contracts, may be conditions precedent to claims. In many civil law jurisdictions, and especially in the Middle East, there may be greater flexibility around such provisions than would be found under English law.

Another common context for arguments based in good faith is the operation of a joint venture. Parties often find that their joint venture agreements lead to deadlock when projects become complicated, and may turn to concepts of good faith to try to persuade their counterparties to behave in a particular way. This will be particularly relevant where one of the parties has its own commercial interests in mind, and is not putting the shared interests of the joint venture first.

Matters such as the valuation of variations or payment applications may also engage concepts of fairness, but generally are objectively ascertainable and so may not require good faith to help solve them. Parties may, nonetheless, seek to use concepts of good faith to cure failures in their formal compliance with relevant contractual procedures.

Perhaps the most serious context in which good faith arguments are seen is in the context of dispute resolution and, especially, termination. Contracts may require a period of good faith negotiations before disputes can be taken to arbitration, and termination may require some threshold of seriousness to have been breached before the contract can be brought to an end. In these situations, the relationships are likely to have soured to a point where engagement is difficult, and good faith often lacking. In this context it can be difficult, beyond a minimum standard of honesty and transparency, to define what good faith actually requires.

Practical considerations 

For parties involved in international construction projects, good faith should be considered at both the drafting and contract administration stages, including:

• the choice of governing law and its approach to good faith;
• what any express good-faith obligation is intended to cover;
• how contractual discretions, including decisions on claims and extensions of time, should be exercised;
• whether significant contractual decisions and the reasons for them should be documented; and
• the role of good faith when exercising significant rights, particularly suspension or termination.

Ultimately, good faith is no substitute for clear drafting and careful contract administration. Understanding how it operates under the governing law can, however, help parties manage their contractual rights more effectively and reduce the scope for disputes.