Implied Duty of Good Faith and Fair Dealing

by Practical Law Commercial Transactions

A Practice Note discussing the implied duty of good faith and fair dealing in US commercial agreements. This Practice Note outlines the scope of the implied duty, how it arises, and the significant variations in its application across different state jurisdictions. It explains how courts use the implied duty to address unforeseen issues by preventing one party from frustrating the other party's rights to the benefits of the contract. The guidance details how breaches of the implied duty are determined and explores whether a breach can be a standalone claim. This Practice Note also distinguishes the implied duty from other obligations, such as best efforts and fiduciary duties, and examines its specific implications in special contractual relationships, including insurance contracts, government contracts, and contracts for the sale of goods governed by the Uniform Commercial Code (UCC).