There’s an implied “good faith and fair dealing” covenant contained in every contract. It essentially amounts to an agreement that both parties make to do their best to comply with the terms of their agreement and be respectful of one another’s circumstances when acting on or enforcing the agreement.
Since good faith and fair dealing is an implied agreement, it’s unlikely that any contract’s terms and conditions will explicitly state that one party should steer clear of interfering with another’s performance or cooperate with them. You must do so, though, or run the risk of someone accusing you of breaching your contract.
What constitutes “good faith” and “fair dealing?”
Many parties to a contract will often ask what exercising “good faith and fair dealing” entails. It essentially means that neither contracted party should do anything that would potentially infringe upon or dash another contracted party’s rights.
“Good faith” has to do with a contracted party being honest when carrying out their contractual obligations. In addition, contracted parties must exercise “fair dealing” with one another to preserve the “spirit” of their agreement.
Parties may take the implied clause to mean that neither party should purposely do something incorrectly or exhibit “lack of diligence or abuse” of their power when carrying out their obligations to one another.
Can contracted parties waive the good faith and fair dealing covenant?
Complications arise since the agreement is implied instead of written. It demands that contracted parties simply are cordial and upfront, so that is not something that either party can waive.
Contracted parties can draft a written agreement superseding the covenant, though. Contracted parties can either limit or waive this right when they have a fiduciary agreement. There’s a clearer obligation for one party to exercise good faith than in other situations.
What you need to know about your contractual rights
Sorting out your contractual obligations so that you don’t unintentionally breach your agreement can be challenging. You shouldn’t take risks in interpreting the contract that may leave you in legal jeopardy. Instead, you should consult with an attorney to ensure that you meet your legal obligations as stated in your agreement.
