GOOD FAITH

The enforcement of private contracts is the cornerstone of both business and business law.  And the terms of a contract will be enforced at face value.  It is not for the Courts to question whether they are fair or not.

It is true that, in Florida, every contract is also subject to a duty of good faith and fair dealing.  But that implied covenant to deal fairly will not change the contract’s terms.  “Good faith and fair dealing,” in fact, is limited to having the parties implement the express terms, as they exist, in good faith.  It will not alter those terms.

A couple of examples may help understand how this works in practice.  When a tenant had an option to renew a lease for a set rent plus charges for maintenance, the landlord had a duty under the covenant of good faith to provide a history of its maintenance costs, so the tenant could make an informed decision.  Providing that information, a Florida court held, was necessary to implement the express terms of the contract’s renewal clause.

On the other hand, when one of two partners in a real estate venture already had thorough knowledge of the expenses associated with the property, the other had no duty to provide additional information, since that would not be necessary for the first one to decide whether to exercise a buyout clause.

The duty of good faith and fair dealing is real.  Some cases, like the landlord-tenant case we mentioned, are decided on its basis.  But it is also limited.  Businesses should be well advised on the scope of their rights and duties.  It is not always as intuitive as one might think.