WHAT IS THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING?
The law implies a requirement that each party to a contract must act in good faith and deal fairly with the other party in performing or enforcing the terms of the contract. This implied agreement is part of the contract, just as though the contract expressly states this good faith and fair dealing requireÂment. To act in good faith and deal fairly, parties must act honestly toward one another when performing or enforcing the contract. One party to the contract cannot do anything that will have the effect of destroying or injuring another partys right to receive the fruits of the contract. However, if an enforceable contract never existed between the parties a claim for violation of the covenant of good faith and fair dealing, such a claim would normally fail. For, in the absence of a contract, there can be no breach of an implied covenant of good faith and fair dealing.
