Also known as: implied conditions of good faith and fair dealing · implied covenant of good faith and fair dealing · good faith and fair dealing
Written by attorneys · grounded in primary & secondary sources — see below
A duty imposed by law on each party to a contract requiring performance and enforcement in a manner consistent with the justified expectations of the other party. The duty prevents a party from using contractual discretion or power to deprive the counterparty of the benefits of the bargain. It applies to every contract and extends to partnership agreements under uniform acts.
Igor Ito's company drew half of a revolving credit line from Ivy Ibarra's bank. The bank then threatened to slow already-approved draws and reinterpret covenants unless Igor signed an amendment with higher fees. Igor signed under pressure. A court later treats the threat as improper because it misused contractual discretion in bad faith.
Ivan Ivanov and India Inoue formed a general partnership. Their agreement attempted to eliminate the good faith obligation entirely. A court holds the elimination invalid because the statute permits only reasonable standards that are not manifestly unreasonable.
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Ibrahim Iqbal as general partner and Ira Irving as limited partner entered a limited partnership. The agreement tried to remove the good faith duty for both. The court enforces the statutory obligation because the agreement may prescribe only non-manifestly unreasonable standards.
Imperial Motors threatened to re-sequence work and withhold approvals owed to Iris Energy unless Iris signed a waiver of delay claims. Iris signed under the threat. A court classifies the threat as improper because it constituted a threatened breach of the duty of good faith and fair dealing.
Icarus Aviation's partner decided to depart despite a severe weather forecast and inoperable radio, causing major vessel damage. The partnership sued for losses. The court measures the partner's conduct against the contractual obligation of good faith and fair dealing under the statute.
Ironclad Industries as limited partner exercised rights under the partnership agreement in a way that undermined the general partner's position without justification. The general partner claimed breach. The court requires the limited partner to exercise rights consistently with the contractual obligation of good faith and fair dealing.
No. The duty prohibits a party from misusing discretion granted under an existing contract to coerce new or amended terms. A threat to slow performance or withhold approvals owed under the contract for that purpose is improper.
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No. Uniform acts permit the agreement to prescribe reasonable standards for measuring performance of the obligation but prohibit outright elimination. Any attempt to remove the duty entirely is invalid.
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A threat to breach the duty of good faith and fair dealing under an existing contract constitutes an improper threat. If that threat induces assent to a new agreement or modification, the resulting contract is voidable on duress grounds.
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No. Acceptance of one improper delivery does not prejudice the right to demand adequate assurance or good faith performance when new grounds for insecurity arise.
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…the existence of significant jurisprudence with respect to good faith in the contractual context of the covenant of good faith and fair dealing, see, e.g., Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P. , 624 A.2d 1199 (Del.1993), Delaware decisions have shown a reluctance to importing these contractual…