X.27. 3. Can A Claim For Breach Of The Implied Covenant Of Good Faith And Fair Dealing Be Asserted With A Breach Of Contract Claim?

• Jurisdiction: New York

3. Can a Claim for Breach of the Implied Covenant
of Good Faith and Fair Dealing Be Asserted With
a Breach of Contract Claim?

The relationship between a claim for breach of contract and for breach of the implied covenant of good faith and fair dealing has not been specifically addressed by the New York Court of Appeals. Some general rules appear from federal court decisions and the decisions of lower state courts.

Practitioners often draft complaints to assert two claims for relief—a breach of contract claim and a claim for breach of the implied covenant. When the claims arise from the same facts, allege the same breaching conduct and seek the same damages, courts have dismissed the claim for breach of the implied covenant as duplicative. This dismissal takes place at the pleading stage and precludes a party from advancing at trial a claim that the implied covenant has been breached. The better practice is to assert one claim for breach of contract alleging that the conduct at issue breached the explicit terms of the contract and/or the covenant of good faith and fair dealing implied in such terms. The contention that the covenant has been breached should not be viewed as a separate claim for relief but as an alternative means to establishing a breach of contract. That view is consistent with the belief that the implied covenant proscribes action that, although not inconsistent with the terms of the contract, frustrates the reasonable expectations of a party, deprives the party of the fruits of the contract and/or undermines the agreement. Pleading in this manner would allow the trier of fact to find at trial that a contract was breached even though no specific term of the contract had been violated.

Some courts have ruled the act that breaches the covenant cannot be the same act which is alleged to breach the contract. They stated that there cannot be a separate claim for relief based on breach of the implied covenant when a breach of contract claim, based on the same facts, is asserted.⁶⁰⁷ They also have ruled that a separate claim for breach of the implied covenant can be deemed duplicative and dismissed if the claimed damages are intrinsically tied to the damages resulting from an alleged breach of contract. The better view is to allow the claim for breach of the covenant to be an alternative to the breach of contract claim. The non-breaching party would allege that

• certain conduct;

• caused it to suffer damage; and

• that conduct...