The implied covenant of good faith and fair dealing refers to an implied obligation that assumes that the parties to a contract will abide in acting in good faith and fairly dealing with one another without breaking their word, using means that are shifty and avoid obligations, or denying what the other party understood. Good faith has generally been defined as honesty in an individual’s conduct during a particular agreement. It is the obligation to perform in good faith that exists in contracts that expressly allow the other individual or party to terminate the contract for any reason. Fair dealing refers to the notion that extends the boundaries of honesty. It requires that a party cannot act in opposition to the spirit of the contract, even if you give the opposing side notice that this is what you intend to do.
Duty of good fair and fair dealing, ultimately, means that parties cannot evade the spirit of bargain, lack diligence, or slack off, perform incorrectly on purpose, or abuse their power when specifying the terms of a contract. Interfering or failing to cooperate in the other party’s performance directly combats the notion of good faith and fair dealing.
Implied Covenant of Good Faith and Fair Dealing: Implied Promise, Breach, and Damages
There are different avenues that relate to implied covenants of good faith and fair dealing. First, there is implied promise. Every contract or agreement will have an implied promise. From this, each of the parties implicitly agree that they will not do anything that destroys or injures the right of the other party to receive the benefits of their side of the contract. The party has the duty to not prevent or harm the performance of the other party.
The second avenue of implied covenant of good faith and fair dealing would be breach. A breach of implied covenant of good faith and fair dealing may constitute a tort as well as a breach of contract. A tort, other than a breach of contract, can result in civil wrongdoing that requires damages. A breach of contract is a tort only when there exists an enforceable contract, a special relationship of trust and special reliance between the parties, and the conduct in question goes well beyond the bounds of ordinary liability for breach of contract.
The third avenue of implied covenant of good faith and fair dealing would be damages. If an individual discovers that the defendant’s breach of implied covenant of good faith and fair dealing was a tort, the plaintiff may be awarded. In addition to his or her contract damages, any other damages that were proximately caused by the defendant’s conduct may be awarded to the plaintiff as well. Damages that were proximately caused within the scope of physical distress, emotional distress, suffering, inconvenience, anxiety, loss of security, peace of mind, humiliation, indignity, or financial losses would fall under this category, and ultimately would award the plaintiff.