What ‘trust’ really means in NEC and how parties can achieve it

Key points

• Clause 10 in NEC contracts requires parties to act in a ‘spirit of trust’ but the legal implication has yet to be tested.
• Trust should be seen its ordinary meaning, with each party acting in a manner that will engender trust by the other party.
• This means each party acting strictly in accordance with its contractual obligations and not diminishing the other party’s rights.

It is 19 years since Sir Michael Latham (1994) published his report Constructing The Team, in which he recommended that the original 1993 New Engineering Contract should be revised to incorporate the words, ‘in a spirit of mutual trust and co-operation’. The report’s recommendation was incorporated in clause 10 of the 1995 NEC second edition and the words have remained in NEC3 and NEC4.

The meaning and legal effect of the clause has been widely debated over the years (Davis, 2016 and 2017) and was most recently reviewed by Leung and Kwok (2020), who concluded, ‘the legal implication of the clause is yet to be ascertained in court.’ However, none of the interpretations of the clause examined by Leung and Kwok gave the word ‘trust’ its standard and ordinary meaning.

What trust means

‘Trust’ is defined in The Chambers Dictionary 10th edition as, ‘worthiness of being relied upon,’ (Chambers, 2006) and in The Shorter Oxford English Dictionary 3rd edition as, ‘To have faith or confidence that something desired is, will be, the case,’ (Onions, 1973). The online Collins English Dictionary explains, ‘If you trust someone, you believe that they are honest and sincere and will not deliberately do anything to harm you,’ (HarperCollins, 2022).

The wording of the obligation in clause 10 is plain. The difficulties identified by Leung and Kwok appear to be legally induced problems arising from attempts to accommodate the wording within existing legal concepts of good faith and fiduciary duties. This is not a problem with the clause as the wording speaks for itself. Clause 10 provides that the parties shall act in a, ‘spirit of trust’. This means that each party must act in a manner that will engender trust by the other party. For this to happen, each party’s actions must be deserving of the other party’s confidence that the actions will be performed trustworthily.

Contractual obligations

The minimum requirement for a party to engender trust by the other party entails that it acts strictly in accordance with its contractual obligations and does not diminish the other party’s rights in a way not specifically provided for in the contract. This places each party in a position with regard to the other party’s rights, which is similar to that of trustee in relation to the assets of a legal trust.

Once each party is secure in the knowledge that the other party will act in accordance with its contractual obligations, and will not diminish the other’s rights, the parties are able to conduct their contractual actions in full co-operation with one another for their respective benefit − and ultimately for the benefit of the project. This binds both contracted parties as a team with the goal of producing a successful project, as opposed to adversarial competitors aiming to protect their own interests.

The precise wording of clause 10 acknowledges the situation, requiring each party to trust in and be trusted by the other party, which in turn facilitates full co-operation.

Conclusions

Clause 10 in NEC contracts does not oblige the parties to trust each other in an emotional sense as emotions cannot be regulated or generated on demand.

What clause 10 does require is for each party to regulate the conduct of its actions which impinge upon the other party’s rights. Their actions must be done in strict compliance with the terms of the contract and must not diminish the rights of the other party in a way not provided for in the contract.

If this approach is adhered to by each party, then a basis for trust between the parties will be attained, which in turn is a prerequisite for genuine co-operation. The certainty then created in the parties’ relationship will reduce conflict and help to ensure success of the project for the benefit of both parties.

References

Chambers (2006) The Chambers Dictionary 10th ed., Chambers Harrap, UK.
Davis T (2016) Trust and the rights to compensation in NEC, NEC Users’ Group Newsletter, 81 (November): 5−6.
Davis T (2017) Clause 10.1 – trust is not good faith, NEC Users’ Group Newsletter, 86 (July): 7. HarperCollins (2022) Collins English Dictionary online, www.collinsdictionary.com/dictionary/english
Latham M (1994) Constructing the Team, HMSO, constructingexcellence.org.uk/constructing-theteam-the-latham-report-2
Leung R and Kwok B (2020) How one shall interpret ‘spirit of mutual trust and co-operation’ in NEC contracts’, Proceedings of the Institution of Civil Engineers – Management Procurement and Law 173(1): 14-20, doi/10.1680/jmapl.18.00051.
Onions C (1973) The Shorter Oxford English Dictionary on Historical Principles 3rd ed. revised with addenda, Oxford University Press, UK.