Implied Covenant of Good Faith and Fair Dealing

In one sentence

An unwritten promise in every contract that parties will act honestly and fairly toward each other.

Plain English

Even if your contract doesn't spell it out, the law automatically reads in a promise that both sides will deal with each other honestly and in good faith. This means you can't use technicalities to sabotage the other party's ability to benefit from the deal, and you can't act in ways that are sneaky or unfair. If someone violates this implied covenant, you can sue them even if they technically followed the written contract's words. It's a fairness backstop that applies to all contracts.

Ad slot

Example

An insurance company receives a valid claim but deliberately delays processing it for months, hoping the claimant will give up. Even if the policy's fine print allows delays, this violates the implied covenant of good faith because the insurer is acting in bad faith to avoid paying.

Used in a sentence

“The court ruled that the employer's refusal to let the employee work violated the implied covenant of good faith and fair dealing.”

Related terms

Voidable Contract

A contract that one party can cancel or reject, but is otherwise valid.

Fraud

Intentional deception or misrepresentation made to trick someone into entering a contract or deal.

Express Warranty

A clear, direct promise about a product's quality, performance, or characteristics.

Disclaimer of Warranties

A statement that removes or limits the automatic guarantees a seller would otherwise provide.

Offer

A proposal to enter into a binding agreement on specific terms.

Acceptance

Agreeing to the exact terms of an offer, creating a binding contract.

Consideration

Something of value exchanged by each party to make a contract binding.

Offeror

The person who makes an offer to enter into a contract.

This page is a plain-English reference and is not legal advice. Laws vary by jurisdiction and change over time. For specific situations consult a licensed attorney.