The Three Faces of Bad Faith How Courts Apply the Duty of Good Faith to Keep the Parties Faithful to the Common Purpose of the Contract
![handle is hein.journals/jfku12 and id is 79 raw text is: [Vol. 12:1 2009]
ARTICLES
THE THREE FACES OF BAD FAITH
How COURTS APPLY THE DUTY OF GOOD FAITH
TO KEEP THE PARTIES FAITHFUL TO THE
COMMON PURPOSE OF THE CONTRACT
By James C. Glassford*
SECTION I. Introduction
A major policy of contract law is to assure that the contracting parties perform their
promises. The law gives the parties a level of security that they will receive the benefits
they bargained for. If a party breaches an express term of a contract, the law will enforce
performance or provide for an award of damages or some other remedy. What happens when
one of the parties unexpectedly behaves in a way not expressly covered by the contract which
is not a breach of an express term but may well deny the other party a benefit of a promised
performance? The law is not powerless in this type of situation.
Most courts imply a covenant of good faith and fair dealing, or simply the duty of good
faith, in every contract. This duty provides additional security to contracting parties. Absent
this implied duty, the aggrieved party may be at the mercy of the other and may lose some
bargained for benefit when the unexpected behavior of the other is not a breach of an express
term. It is the function of the duty of good faith to prevent either party from doing or
refraining from doing anything which will have the effect of destroying or injuring the right
of the other party to receive the fruits of the contract.' This overstates the scope of the duty
of good faith. Not every act of a party which injures another's contractual right is done in bad
faith. As with any other broad concept of law, drawing the line between good faith and bad
faith can be difficult. Finding the line begins with the meaning of good faith.
In a broad sense, good faith means faithfulness to an agreed common purpose and
consistency with justified expectations of the other party.'2 In another sense, it means
James C. Glassford has been a solo practitioner in Walnut Creek since 1987, handling personal injury cases
and general civil litigation, including numerous business and contract disputes. Prior to that time, he was
with Naphan & Burge and a partner with Naphan & Glassford, both in Oakland. He was a captain in the
United States Air Force until 1970 and received the Bronze Star. He served in the Air Force as a contracting
officer, responsible for the formation and administration of government contracts with private companies.
BS, 1966, United States Military Academy at West Point,JD, 1974, Golden Gate University.
1 Kirks La Shelle Co. v. Paul Armstrong Co., 263 N.Y. 79,87 (1933).
2 RESTATEMENT (SECOND) OF CONTRACTS §205, comment a (1981).](ViewImageLocal?handle=hein.journals/jfku12&div=8&collection=&method=preview&ext=.png&size=3)
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