What is a breach of the implied covenant of good faith?

A breach of the implied covenant of good faith in contract law is a violation of an unwritten promise of trust between the two parties (the promisor and the promisee). This implied promise is that both sides of the contract will act in good faith and fair dealing. This means the parties will act reasonably and ethically in how they negotiate, fulfill, and interpret their contractual obligations. In California, an implied covenant of good faith is presumed to be included in every contract, even written ones. When one party fails to act with good faith, they are said to have breached the implied covenant of good faith. This breach means the parties’ deal is either not valid or can be broken. Examples of a breach of the implied covenant of good faith include a party intentionally hiding or misrepresenting information, or using their own discretion to make a decision that works against the other party’s interests. It can also include a party failing to fulfill their obligations under the contract or interfering with the other party’s performance. If a court finds that a breach of the implied covenant of good faith has occurred, the damages can be significant. The court may void the entire contract or award damages such as lost profits, lost opportunities, or even punitive damages. In California, a successful plaintiff in a breach of the implied covenant of good faith lawsuit can also be awarded attorney’s fees and costs.

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What is a breach of the implied covenant of good faith?

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