Covenant Of Good Faith And Fair Dealing

In every contract, there is an implied covenant of good faith and fair dealing.  One party to a contact is under an obligation to do nothing that would interfere with the performance of the other party.  If one party makes the other party’s performance impossible, the obligation to perform is discharged.  For example, if  a contractor refuses to allow his subcontrac­tor access to the property where the subcontractor is to do the work, the contract is discharged as to the subcontractor.  The subcontractor would have a cause of action against the contractor, but the contractor would not have a cause of action against the subcontractor.

If the conduct of the other contracting party does not make performance impossible, but only more difficult or expensive, or causes a delay, the contract may not be discharged, but the injured party will be entitled to damages for any loss he incurred.  In our example, if the contractor eventually allowed the subcontractor on the work site, the contract would not necessarily be discharged, but the subcontractor could get damages for any loss he incurred.


Inside Covenant Of Good Faith And Fair Dealing