Carmichael v. Adirondack Bottled Gas
- P and her husband bought a petroleum gas distributorship and entered into contractor's agreement with D that said D would supply gas to P to supply to P's customers.
- The agreement contained a "key man" clause that said that in the case of P's husband's death, the contract would terminate.
- P's husband died, and P decided that she wanted to keep the business.
- D wanted to buy the distributorship for a low price, but P would not sell. D then threatened that they would not provide any more gas and that P would be out of business by Monday.
- P accepted this and began selling her business assets.
- Later, D pressured P to sign an agreement signing over all of her remaining assets to D.
- P filed suit against D for return of deposits, collection of accounts, etc. D filed suit against P for inventory not returned, fuel not paid for, etc.
- The lower court dismissed all of P's claims except for the count that alleged that D's conduct toward P following the death of her husband amounted to a breach of the implied covenant of good faith and fair dealing.
- Lower court jury found for P, awarded $60k actual and $100k punitive.
- VT Supreme Court affirmed the judgment, found for P.
- Does the obligation of good faith and fair dealing continue even after a contract has been terminated because of a "key man" clause?
- The obligation of good faith and fair dealing continues even after a contract has been terminated because of a "key man" clause.
- An underlying principle implied in every contract is that each party promises not to do anything to undermine or destroy the other's rights to receive the benefits of the agreement.
- The implied promise of good faith protects against a variety of conduct characterized as involving bad faith because they violate community standards of decency, fairness, or reasonableness.
- Examples of bad faith are evasion of the spirit of the bargain, lack of diligence or slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party's performance.
- Good faith is ordinarily a question of fact, one particularly well-suited for juries to decide.
- All post-termination activity was subject to good faith and fair dealing. Although the "key man" provision may have spelled an end to the parties' contractually contemplated business-as-usual, the provision did not extinguish the context of prior dealings between the parties.