Written by attorney Casey B. Green

The Implied Covenant of Good Faith and Fair Dealing in Pennsylvania

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement. Restatement (Second) of Contracts § 205 (1985). In Pennsylvania, the law is clear that “[i]n the absence of an express provision, the law will imply an agreement by the parties to a contract to do and perform those things that according to reason and justice they should do in order to carry out the purpose for which the contract was made and to refrain from doing anything that would destroy or injure the other party's right to receive the fruits of the contract. Accordingly, a promise to do an act necessary to carry out the contract must be implied." Daniel B. Van Campen Corp. v. Building & Construction Trades Council, 195 A.2d 134, 136-137 (Pa. Super. Ct. 1963).

The covenant of good faith and fair dealing, although implied in every contract, is used to interpret the contract and generally does not give rise to a separate cause of action, either in tort or contract. Therefore, an implied duty of good faith will be read into the performance of every agreement so that the court may evaluate whether the terms of an agreement have been breached. However, if the court determines there was a breach, the consequence will be breach of contract rather than an independent breach of a duty of good faith and fair dealing.

Furthermore, Pennsylvania law does not recognize a claim for breach of covenant of good faith and fair dealing as an independent cause of action separate from the breach of contract claim since the actions forming the basis of the breach of contract claim are essentially the same as the actions forming the basis of the bad faith claim. McHale v. NuEnergy Group, No. 01-4111, 2002 U.S. Dist. LEXIS 3307, at *23 (E.D.Pa. Feb. 27, 2002). For that reason, a claim based on breach of the covenant of good faith and fair dealing, when embedded within a complaint that also alleges breach of contract, will be regarded by the courts as nothing more than a carbon copy of the breach of contract claim.

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