Ahead of its time

The real problem with the new PPC2000 partnering contract is that the developing trend of collaboration both within the supply chain and between supply chain and customer requires English law to move forwards. Although there is some recognition of concepts such as good faith in other countries, English courts remain overwhelmingly concerned with a need for certainty. In that context, a contract that seeks to impose such duties is going to have its detractors – but that shouldn't put us off.

In the evolution of collaboration in the supply chain, we need to be more forward-thinking about PPC2000. The drivers for such contracts are likely to be around for some considerable time. The difficulty with such contracts is that they sit uneasily with the general approach of English law to contract and obligations. English law has always worked on a basis of buyer beware and is in essence a laissez-faire legal culture. Parties protect themselves by the contracts and clauses they agree to; they are "masters of their contractual fate". If they don't, then they can expect little sympathy from the courts.

Contractual obligations are based on agreement and it is a long-established principle that with few exceptions, parties may reach such agreements as they wish. The other key principle is that of certainty in contract terms. The courts look for certainty in agreements so that the terms of the bargain reached are clear and enforceable.

One of the difficulties with the partnering culture, and therefore with contracts such as PPC2000, is to produce clauses that have sufficient certainty. Clauses requiring collaboration are very difficult to police – they are even harder to prove breach of in court or arbitration proceedings. And even if a breach can be shown, the resulting loss is an extremely difficult issue. This places the responsibility on those preparing such provisions and contracts.

Damages for breach of contract are supposed to put the innocent party in the position they would have been had it not been for the other party's breach. Does the absence of collaboration or co-operation lead to a loss? If so, what is it and how does it manifest itself in a way that is not dealt with under any of the more formal clauses and provisions contained in the contract? It is in this context that the softer obligations of co-operation, collaboration and good faith struggle for recognition. However, other jurisdictions are more willing to accept such obligations. Economic torts (which apply where there is no contract), such as not interfering in business interests and not procuring a breach of contract, are recognised in Australia and Canada. My own experiences of the Court of Appeal some years ago in the case of Indata vs ACL indicated that the court disliked general duties that might impact on the approach of English law. In that case, a broker was cut out of a transaction in order that another party could use the commission to sweeten the transaction. The Court of Appeal decided the case on the basis of confidential information and avoided adopting the concepts of unlawful interference in business interests in situations where there was no contract. More recently the Court of Appeal has looked more favourably on enforcing obligations of good faith.

Despite the Construction Act, it remains the case that the law which applies to interpreting contracts is general law. Back in 1973, in Gilbert-Ash, it was noted "no overriding rules or principles" apply "beyond those which generally apply" simply because it is a construction contract. The construction industry cannot necessarily expect that the desire to introduce partnering concepts will be embraced by the courts if such contracts come before them. But we can seek to arrive at contract forms that overcome these difficulties and perhaps introduce an element of custom, trade and practice into how such terms are viewed and interpreted.

A sea change in the approach of English law is unlikely and the immediate difficulties of enforcing provisions such as set out in PPC2000 will remain. The only solution is for parties to honour those obligations in both spirit and deed. Of course if parties are really willing to do that then there is not much need for the PPC2000 beyond serving an evolutionary role in moving the law and practice forwards.