A cause of action in tort that permits recovery of damages for a defendant’s interference with, or failure to cooperate with, the plaintiff’s performance of a contract with the defendant.

In order to recover for breach of the covenant of good faith and fair dealing, the plaintiff must establish each of the following five elements:

  1. The plaintiff entered into an enforceable contract with the defendant;
  2. The plaintiff fulfilled his/her obligations under the contract;
  3. Any and all conditions precedent to the defendant’s performance occurred;
  4. The defendant unfairly interfered with the plaintiff’s rights to receive the benefits of the contract; and
  5. The plaintiff was harmed by the defendant’s conduct.

REFERENCE DESK

“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement . . . In essence, the covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.” Rosal v. First Bank of Cal., 671 F. Supp. 2d 1111, 1129 (N.D. Cal. 2009).

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.  The covenant thus cannot be endowed with an existence independent of its contractual underpinnings.  It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 349-50 (2000).

Related entries