No reasons needed to end property maintenance contract

Posted: 16th May 2013

An adjudicator’s award of almost £400,000 to a building maintenance company whose contract with a housing association was prematurely terminated has been overturned by the High Court on the basis that either party was entitled to withdraw from the agreement on three months’ notice without giving any reasons for doing so.

Council housingFollowing a competitive tendering the exercise, the company had been awarded a four-year contract to maintain the association’s stock of 5,500 homes. The company swiftly became disillusioned in relation to the sums it was being paid it was being paid but the association responded that the company had known the risk when it tendered.

The association terminated the company’s contract just over half way through the intended four-year term and had since ‘never explained openly’ why it had done so. The association pointed to a term in the contract which enabled either party to terminate without cause on giving three months’ notice.

The company argued successfully before an adjudicator that the early termination for no apparent reason amounted to a breach of the association’s obligations of trust, fairness and mutual co-operation under the contract. The adjudicator awarded the company £383,778.91 in respect of losses and costs incurred as a result of the premature termination of its appointment.

Allowing the association’s appeal and quashing the adjudicator’s decision, the court ruled that, even if an obligation of good faith could be implied into the contract, it could not circumscribe or restrict the parties’ specific agreement that the contract was terminable at any time by either party on three months’ notice.  The association had also not been obliged to give any reason, good or bad, for its decision.