Commercial Division Blog

Posted: September 26, 2016 / Categories Commercial, Contracts

Implied Covenant of Good Faith and Fair Dealing Claim Should Have Been Dismissed

On September 14, 2016, the Second Department issued a decision in 1357 Tarrytown Road Auto, LLC v. Granite Properties, LLC, 2016 NY Slip Op. 05981, dismissing a claim for breach of the implied covenant of good faith and fair dealing, explaining:

The implied covenant of good faith and fair dealing is breached when a party acts in a manner that would deprive the other party of the right to receive the benefits of their agreement. The implied covenant includes any promises which a reasonable promisee would be justified in understanding were included. However, no obligation may be implied that would be inconsistent with other terms of the contractual relationship. Here, a finding that the defendants breached the covenant of good faith and fair dealing would necessarily contradict explicit and unambiguous terms of the lease agreements and create additional obligations not contained in them. Specifically, the lease agreements, which the defendants submitted in support of their motion, provided that the written agreements superseded all representations and understandings, written, oral or otherwise, between or among the parties with respect to the matters contained herein. Additionally, the specific provisions in the lease agreements relating to parking were made subject to any restrictions of local law, zoning or ordinance. Finally, the lease agreements specifically provided that the landlord made no representation concerning the suitability of the premises for the plaintiffs' intended business. Imposing a duty on the landlord to disclose zoning or local law restrictions would render those provisions ineffective. These express and specific provisions in the lease itself conclusively establish a defense to causes of action alleging breach of the implied covenant of good faith and fair dealing.

(Internal quotations and citations omitted) (emphasis added).