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Timeshare and Implied duty of good faith

Many Timeshare contracts are obfuscated, not intentionally but to give effect to the many deliverances which are required to bring the timeshare concept to the market. For instance, they may be a seller, members club, management company, trustee and developer etc. All are complexed and wordy contracts that cross-reference one another which (on many occasions) the consumer does not read or fully understand.

In disputes, all parties will examine a contract and give meaning to the terms of a contract both assented to. The contracts are made up of different types of terms however, many terms will not exist in the contract and are referred to as Statutory Implied Terms and Implied Terms. Implied terms are words or provisions that one can assume were intended to be included in a contract. This means that the terms aren’t expressly stated in the contract but nevertheless exist.

An implied term in law refers to the practice of setting down default rules for contracts or setting down mandatory rules which operate to override terms that the parties may have themselves chosen.

Terms Implied in Fact are often, terms that you do not think of expressly including in the contract because they ‘go without saying’ statement. For example, it goes without saying that if you visit a Timeshare Resort the premises will be in reasonable condition.

In England, there is no overriding law or principle of law that one party must act in ‘good faith’ when dealing with the other. Nor is there a law that the parties to a contract must negotiate, perform their obligations or exercise their rights under a contract in ‘good faith’ and to one another.

There is no universal definition of ‘good faith’ which is used in legislation or that the courts rely on when settling disputes.  A duty of ‘good faith’ has been described by the courts as ‘playing fair’, ‘coming clean’ or ‘putting one’s cards face upwards on the table.’  The approach to ‘good faith’ and dealing with unfairness is developing case law and has been delivered piecemeal – at best:

Specific types of the contract impose duties on one party to act other than in their own interest, for example: –

An agent must act honestly and not allow its interests to conflict with those of its principal.

In relational contracts which involve cooperation and mutual trust, although there may be no express term in the agreement to act in good faith, a duty to act honestly is implicit and necessary to give business efficacy to the relationship.

Insurance contracts are unique as the party’s act in utmost good faith and disclose all material facts to the insurer.

Recently the issue of implied duties of good faith has recently come back before the courts again. In Bates -v- Post Office Ltd (No.3) [2019] EWHC 606 (QB), the High Court held that the liability, payment, termination and suspension provisions of a contract were subject to an implied duty of good faith.

Facts

The case involved a number of people who were responsible for running subbranches across the UK and was relational’ contract

What amounts a relational contract?

The judge said that whether a contract was relational depended on the circumstances of the relationship, defined by the terms of the agreement in its commercial context. Relevant characteristics, in this case, included some of the following considerations:

There were no express contract terms that prevented the duty of good faith from being implied

These were long-term contracts, just like timeshares.

The parties intended their roles to be performed with integrity and fidelity to their bargain

The parties were committed to collaborating to perform the contract.

The spirits and objectives of the venture could not all be expressed in a written contract

The parties put trust and confidence in one another, though not the kind of trust and confidence found in fiduciary relationships.

Clearly what amounts to a relational contract will depend to a large degree on the facts of the particular case but nevertheless, appear consistence with Timeshare Contracts.


Posted on: 8th July 2019