Understanding the Covenant of Good Faith and Fair Dealing in Contract Law

The covenant of good faith and fair dealing is an implied agreement in every contract that the parties will act honestly and fairly in fulfilling their contractual obligations and would not undermine the other side’s ability to receive the benefits of the contract.

Under Florida law “[e]very Florida contract contains an implied covenant of good faith and fair dealing that protects the parties’ reasonable expectations of honest conduct in their contractual obligations.” Avant Design Group, Inc. v. Aquastar Holdings LLC, 351 So. 3d 62, 71 (Fla. 3d DCA 2022).

However, there are two limitations on claims for breach of the covenant of good faith and fair dealing: “(1) where application of the covenant would contravene the express terms of the agreement; and (2) where there is no accompanying action for breach of an express term of the agreement.” Diageo Dominicana, S.R.L. v. United Brands, S.A., 314 So. 3d 295, 299 (Fla. 3d DCA 2020).

“Florida law prevents reliance on the implied covenant of good faith and fair dealing to change the express terms of a binding contract.” N. Bay Green Investments, LLC v. Cold Pressed Raw Holdings, LLC, 388 So. 3d 266, 277 (Fla. 3d DCA 2024); see also McCoy v. Durden, 155 So. 3d 399, 404 (Fla. 1st DCA 2014) (“Although the covenant arises from a contract, the implied covenant of good faith and fair dealing cannot be used to vary the express terms of a contract.”); Three Keys, Ltd. v. Kennedy Funding, Inc., 28 So. 3d 894, 903 (Fla. 5th DCA 2009) (“[T]he implied covenant of good faith cannot be used to vary the terms of an express contract.”); Snow v. Ruden, McClosky, Smith, Schuster & Russell, P.A., 896 So. 2d 787, 791 (Fla. 2d DCA 2005) (implied covenant of good faith “cannot override an express contractual provision”); Avatar Dev. Corp. v. De Pani Const., Inc., 834 So. 2d 873, 876 (Fla. 4th DCA 2002) (“[A]n implied covenant of good faith cannot be used to vary the unambiguous terms of a written contract and when parties negotiate a fully specified, unambiguous contract, this court is not at liberty to change their bargain.”).

In fact, “[w]hen the language of a contract is clear and unambiguous, courts must give effect to the contract as written and cannot engage in interpretation or construction as the plain language is the best evidence of the parties’ intent.” Castro v. Mercantil CommerceBank, N.A., 305 So. 3d 623, 626 (Fla. 3d DCA 2020). The implied covenant of good faith and fair dealing “must relate to the performance of an express term of the contract and is not an abstract and independent term of a contract which may be asserted as a source of breach when all other terms have been performed pursuant to the contract requirements.” Sobi v. First S. Bank, Inc., 946 So. 2d 615, 617 (Fla. 1st DCA 2007).

As seen, the covenant of good faith and fair dealing is a sort of “catch all” protection for contracting parties against parties potentially acting in bad faith. Parties should be careful though because certain terms in a contract may be deemed one sided, but as long as the parties voluntarily accept them, it will be difficult to try to undo them relying on the covenant of good faith and fair dealing.

For those navigating contractual disputes, understanding your standing and the legal requirements is essential. By taking the proper steps and consulting with qualified legal counsel, you can protect your contract rights better.

For more information regarding breach of contract actions, contact an experienced attorney in Miami at 305-570-2208.

You can also contact attorney Eduardo A. Maura at eduardo@ayalalawpa.com.

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[The opinions in this blog are not intended to be legal advice. You should consult with an attorney about the particulars of your case].