Further, pursuant to the operation of clause 41.9 of the Subcontract, the Court of Appeal extended the principles espoused in Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211, holding that Probuild ought to have exercised its reserve power to grant extensions of time, both honestly and fairly, having regard to the underlying rationale of the prevention principle. Notably, the contract in this case did not contain the usual amendments that modern construction contracts generally contain to counter the effects of Peninsula Balmain, namely that the unilateral power to extend time is for the benefit of the principal (or in this case, the head contractor) only and that the power need not be exercised for the benefit of the contractor. If such a provision had been included, it would have been more difficult for DDI to ultimately succeed, although it is questionable whether the outcome in the immediate appeal would have been any different given it was dealing with an application to set aside an adjudication determination under the notoriously “rough and ready” regime provided by the SOP Act. Application of the Implied Duty of Good Faith Separate to the rationale of the prevention principle, and by reference to Alcatel Australia Ltd v Sarcella,9 which followed the seminal case of Renard Constructions (ME) Pty Ltd v Minister for Public Works,10 Justice McColl held, and Beazley ACJ and Macfarlan JA agreed, that “if necessary” there was an implied duty on Probuild to act in good faith in exercising the unilateral power to extend time. Good faith contemplates good standards of both commercial morality and practice. In particular, it requires contracting parties to exercise their rights in such a way that the parties in question may enjoy the benefits anticipated to come from the contract. As previously established, this duty is founded upon the broad doctrines of contract law and forms a general duty to cooperate and limit unconscionable behaviour so as to maintain loyalty to the contract and builds upon fundamental expectations between contracting parties, such as: • To act reasonably, honestly and fairly • To do all things necessary as to co-operate in achieving the contractual aim • Not to prevent, impede, fetter or hinder the other party in the performance of the contract The exact scope of the duty of good faith in commercial contracts in Australia is an unsettled and developing area of law. This present case, and particularly the manner in which her Honour referred to the implied duty of good faith as essentially being a matter of course, tends to suggest that the courts, or at least the NSW Court of Appeal, is prepared to find a duty to act in good faith in the exercise of contractual discretions. This is quite a development and ought to be borne in mind when drafting such discretions. On one view, this implied duty compelled Probuild to perform its contractual obligations and to exercise the discretion conferred on it by clause 41.9 of the Subcontract because it was beneficial towards the overall performance of the bargain to do so. Probuild’s appeal was unanimously dismissed with costs.