A dispute between Fujitsu and IBM recently reached the Courts in relation to IT and business process services provided by IBM as the main contractor under a long term “partnering” agreement. In broad terms, IBM sub-contracted the day to day management, support and maintenance of the IT infrastructure to Fujitsu whilst retaining responsibility for IT transformation and strategy. The partnering approach was referred to upfront in the main terms of the subcontract and then detailed partnering principles on how the parties were to work together, for example in an “open, honest, clear and reliable basis” “to establish a shared commitment to customer focussed service delivery”, were set out in one of the annexes.
Fujitsu made a claim against IBM arguing that IBM had not properly allocated work to them and had been in breach of fiduciary duties and duties of good faith. Fujitsu based their argument for the co-existence of fiduciary and good faith duties alongside the contract on the basis of the partnering principles. The judge was not convinced and held that fiduciary obligations did not arise. The judge went on to say that the drafting was clear and meant that the parties only had “to have regard to” the partnering principles which were “aspirational and motivational – part of a vision”. The principles were held to lack contractual certainty and did not have any direct contractual effect, the parties chose to agree to have regard to them but no more. As they had not expressly agreed to owe a duty of good faith, none was to be implied.
It is very clear that when parties have entered into a detailed contractual arrangement, the Court is reluctant to interpret the written terms in a way which might “distort” the bargain they have made. Fiduciary duties are not likely to arise in a contractor-subcontractor relationship even when it is long term. If parties want an obligation of good faith to exist, they need to specifically include one – relying on the label of “partnering” is not enough. Clear and specific drafting is key.
Brioney Thomas is a Partner and Marcus Walters is an Associate in the Commercial team dealing with major projects and other commercial arrangements.