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Tymshare, Inc. v. Covell - 234 U.S. App. D.C. 46, 727 F.2d 1145 (1984)

Rule:

The concept of good faith in the performance of contracts is an "excluder." It is a phrase without general meaning (or meanings) of its own and serves to exclude a wide range of heterogeneous forms of bad faith. In a particular context the phrase takes on specific meaning, but usually this is only by way of contrast with the specific form of bad faith actually or hypothetically ruled out. The significance of the doctrine is in implying terms in the agreement. The doctrine of good faith performance is a means of finding within a contract an implied obligation not to engage in the particular form of conduct which constitutes "bad faith." 

Facts:

Appellee William J. Covell worked for appellant, Tymshare, Inc. According to Tymshare, Inc.'s compensation plan, Covell received a salary plus commissions on all sales in excess of designated annual sales quotas, which appellant could modify. The plan stated that Covell would be paid the commissions on a monthly basis. Tymshare, Inc. set Covell's quota after he helped Tymshare, Inc. win a major contract. Revenues from the major contract increased dramatically, as did Covell's commissions. Tymshare, Inc. withheld several commission payments and changed Covell's monthly quotas to erase the surplus owed to Covell. Tymshare, Inc. then terminated Covell's employment. Covell sued Tymshare, Inc. for breach of the compensation plan, discharge in breach of contract, and wrongful discharge. The district court granted Covell’s motion for summary judgment. 

Issue:

Did the district court err in granting Covell’s motion for summary judgment?

Answer:

Yes

Conclusion:

The appellate court reversed the judgment because there were questions of fact concerning whether Tymshare, Inc. retroactively increased Covell’s quota with the intent of terminating Covell’s employment and whether Tymshare, Inc. terminated Covell's employment in good faith.

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