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United Airlines v. Good Taste, Inc - 982 P.2d 1259 (Alaska 1999)

Rule:

The covenant of good faith and fair dealing is well accepted in Illinois, and its broad contours are firmly established: the covenant is implied in every contract. The implied covenant guides the construction of contracts without creating independent duties for the contracting parties. Its implied terms cannot modify the express terms of the contract.

Facts:

Plaintiff Good Taste, Inc. brought a breach of implied covenant claim against defendant United Airlines when it terminated a catering contract with them. The contract provided for a three-year contract that could be terminated by either party upon a 90-day prior written notice. Plaintiff claimed fraud, breach of contract, and breach of the implied covenant of good faith and fair dealing. The trial court dismissed the breach of contract claim but allowed the other claims to be tried. A jury found no fraud but a breach of the implied covenant. United Airlines moved for summary judgment, but it was denied. Defendant United Airlines appealed.

Issue:

Did defendant airlines violate the implied covenant when it terminated the three-year catering contract at will?

Answer:

No.

Conclusion:

The court reversed the denial of plaintiff's motion for summary judgment on defendant's breach of implied covenant claim because the contract could be terminated for no cause upon 90 days’ notice and the implied covenant did not require plaintiff to have a legitimate business reason for termination. The no-cause termination provision was clear and unambiguous.

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