What is an implied covenant of good faith?

An implied covenant of good faith is a legal theory that is recognized in the state of Virginia that implies that parties to a contract must act in good faith when performing their contractual obligations. This means that no party should do anything to deliberately harm the other in any way, either by lying, breaking promises, or purposely acting in bad faith. The implied covenant of good faith does not necessarily mean that the parties must act with the highest moral standards, but that they must follow the contractual agreement and not do anything to hinder the other’s ability to also benefit from the agreement. It is a concept of fairness to both parties in a contract. This concept is especially important in situations where a contract is based on trust between the parties, such as in employment contracts, partnerships, or long-term leases. The implications of the implied covenant can be serious if one party does not act in good faith. This can result in legal action or damages being awarded to the non-breaching party.

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What is an implied covenant of good faith?

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