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Contractual Breach of the Implied Covenant of Good Faith and Fair Dealing
Contractual Breach of the Implied Covenant of Good Faith and Fair Dealing occurs when a party to a contract literally complies with the terms but acts in such a way so as to frustrate the intention and spirit of the contract. Any contract may give rise to an action for contractual breach of the implied covenant, which can result in contract damages; however a special relationship between the parties may also give rise to an action for Tortious Breach , which can result in tort damages. In either case, only actions taken after the formation of a contract can give rise of a breach of the implied covenant.
The elements of a contractual breach of the implied covenant of good faith and fair dealing are:
- A contract exists between the parties;
- One party performs the contract in a manner that is unfaithful to the purpose of the contract;
- Accordingly, the other party’s justified expectations are denied.