Avoid Landmines When Asserting Breach of Good Faith Contracts
Government contractors often struggle with the next steps when the agency does act fairly. The government sometimes refers to the expressed contract clauses during litigation in order to eliminate any other contract remedies to businesses that exercise their rights to a breach of implied covenant of good faith & fair dealing.
What is the Implied Covenant of Good Faith and Fair Dealing?
When it comes to analyzing good faith contracts, the implied duty of good faith and fair dealing is a common law principle which suggests that every contract imposes upon each party a duty to cooperate in good faith and deal with each other fairly.
When parties enter a contract, they each expect the other to act faithfully and above board. The contract does not have to expressly state this requirement.
- When the government does something that on its face suggests under-handed activity, this can give rise to a breach of implied covenant of good faith and fair dealing.
- A breach of this duty can occur when there is a termination for default or even denial of a contract claim.
Duty of Fair Dealing? Watch for Mistakes Made By the Government
When appealing a Contract Disputes Act case because of an adverse contracting officer’s final decision, the government may attack your claim for breach of the implied duty of fair dealing by assuming that such a claim “is limited to ensuring compliance with the express terms of the contract and, thus, does not create obligations not contemplated in the contract itself.”
The U.S. Court of Federal Claims rejected this argument in the case of MANSOOR INTERNATIONAL DEVELOPMENT SERVICES, INC. V. U.S because the government’s position would eliminate any possibility that breach of the implied covenant of good faith could itself provide the basis for a claim that a contract was breached.
- The court stated that the implied covenant of good faith and fair dealing in government contracts stems from the consensual terms reflected in an expressed contract, but it addresses the parties’ reasonable expectations that may not have been embodied in explicit contractual language.
Scope Changes and Claims: Oftentimes, the government contracting agency directs contractors to perform additional work. It also orders contractors to do something that would require a change order of amendment to the contract. When the contractor submits a claim, the agency may deny the claim and assert that the contract never included this level of work.This could be a possible violation of the good faith contracts rule.
Contractors must be aware of some critical mistakes made when they seek to allege breach of the implied covenant of good faith and duty of fair dealing.
- Never take orders from the COR or COTR when performing the contract.
- Always seek written permission from the contracting officer before proceeding with scope changes.
Your implied covenant of good faith and fair dealing claim is only as good as you have documentation to prove your case. Taking direction from another government employee can severely harm your case on appeal.
Get help understanding good faith contracts or litigating your breach of the implied covenant of good faith or duty of fair dealing claim or argument, call our government contract claims and dispute lawyers at 1-866-601-5518 for a FREE INITIAL CONSULTATION.