Friday, April 26, 2013

contracts - duty of good faith and fair dealing

MYSERVICESFORCE v. American Home Shield – ED Pa. – April 24, 2013

 “Courts have defined the duty of good faith as [h]onesty in fact in the conduct or transaction concerned, adopting the definition set forth in Section 1201 of the Uniform Commercial Code, 13 Pa.C.S. 1201.”3 Southeastern Pennsylvania Transp. Auth. v. Holmes, 835 A.2d 851, 858 (Pa. Commw. Ct. 2003) (citing Creeger Brick Building Supply Inc. v. Mid-State Bank Trust Co., 560 A.2d 151, 153 (Pa. Super. Ct. 1989)); see also Cavanaugh v. Avalon Golf Props., LLC., No. E2010–00046–COA–R3–CV, 2011 WL 662961, at *8 (Tenn. Ct. App. Feb. 24, 2011) (same).

Courts have further recognized that, while “‘a complete catalogue of types of bad faith is impossible,’” bad faith may include: “‘evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party’s performance.’” Stamerro v. Stamerro, 889 A.2d 1251, 1259 (Pa. Super. Ct. 2005) (quoting Somers v. Somers, 613 A.2d 1211, 1213 (Pa. Super. Ct. 1992)); see also Sanders v. Breath of Life Christian Church, Inc., No. W2010–01801–COA–R3–CV, 2012 WL 114279, at *21 (Tenn. Ct. App. Jan. 13, 2012) (“Based on the duty of good faith, this Court has recognized that each party to a contract is ‘under an implied obligation to restrain from doing any act that would delay or prevent the other party’s performance of the contract’ and that ‘[e]ach party has the right to proceed free of hindrance by the other party.’” (quoting ACG, Inc. v. Southeast Elevator, Inc., 912 S.W.2d 163, 168 (Tenn. Ct. App. 1995)). Nonetheless, “‘the common law duty of good faith does not extend beyond the agreed upon terms of the contract and the reasonable contractual expectations of the parties.’” Dick Broad. Co. v. Oak Ridge FM, Inc., ___ S.W.3d ___, 2013 WL 175491, at *9 (Tenn. 2013) (quoting Wallace v. Nat’l Bank of Commerce, 938 S.W.2d 684, 687 (Tenn. 1996)).
Consequently, “‘[t]he implied obligation of good faith and fair dealing does not . . . create new contractual rights or obligations, nor can it be used to circumvent or alter the specific terms of the parties’ agreement.’” Id. (alterations in original) (quoting Lamar Adver. Co. v. By-Pass Partners, 313 S.W.3d 779, 791 (Tenn. Ct. App. 2009). See also John B. Conomos, Inc. v. Sun Co., Inc. (R&M), 831 A.2d 696, 706-07 (Pa. Super. Ct. 2003) (stating that, since the “‘obligation of good faith is tied specifically to and is not separate from the [express] duties a contract imposes on the parties,’ it cannot imply a term not explicitly contemplated by the contract” (alteration in original) (quoting Murphy v. Duquesne Univ. of the Holy Ghost, 777 A.2d 418, 434 n.11 (Pa. 2001))).