Contracts & ExecutionQuestion 854 of 1605
The 'implied covenant of good faith and fair dealing' that accompanies most contracts requires that:
a.Every contract include an arbitration clause
b.The parties renegotiate the price yearly
c.Neither party do anything to unfairly deprive the other of the benefits of the agreement
d.Each party maximize the other's profit
Explanation
Every contract carries an implied covenant of good faith and fair dealing, meaning neither party may act to unfairly frustrate or deprive the other of the benefits they reasonably expected from the contract. It does not require a party to sacrifice its own interests or maximize the other's profit, does not mandate yearly renegotiation, and does not require an arbitration clause; it simply forbids bad-faith conduct that undermines the deal's purpose.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)