The law provides that every written agreement/contract is to be read and interpreted with a “reasonable and common” understanding of what the deal is, even if every last aspect of the deal is not spelled out in the contract.
Therefore, if a contract states that I am to wash my neighbor’s car at the local carwash in exchange for $50 per week, that arrangement (car washing in exchange for money) is the deal. The deal is not hard to understand.
However, let us presume that my neighbor thinks that $50 per week is too high/expensive. Just like I cannot get out of the contract, my neighbor similarly cannot get out of the contract.
If my neighbor is particularly committed to getting out of the contract, my neighbor might try to get creative. For example, my neighbor might buy the carwash (where I am contractually bound to wash the car) and close that carwash. At that moment, I would be forced to breach my contract with my neighbor, because I cannot wash my neighbor’s car at the specific local carwash that my neighbor has closed.
Some gamesmanship (like my neighbor’s carwash purchase/closing above) might not ultimately get my neighbor what my neighbor wants. This is because the law provides that good faith and fair dealing is a part of every contract, regardless of whether the contract mentions good faith and fair dealing.
Therefore, if my neighbor’s purchase and closing of the car wash was motivated by a desire to get me to breach our contract, the neighbor may be forced to continue to honor the contract by letting me wash the car at a different carwash. Otherwise stated, everyone is required to perform under a contract honestly and fairly within the bounds of the expectations of everyone involved in the contract.
Good faith and fair dealing is an unwritten component of every contract (as a matter of law) that requires that every party (person involved with and bound by) to a contract be faithful to the agreed-upon purposes of the contract and act consistently with the justified expectations of the other party to the contract.
The opposite of good faith and fair dealing is called “bad faith.” Bad faith might be abusing power (being unreasonable in identifying certain terms that were not decided upon upfront) or interfering or failing to cooperate in allowing the other party to the contract to perform under the contract. My neighbor’s actions intended to force me to breach the contract in an example of bad faith.
Taking advantage of hyper-technicalities in contracts, technicalities that do not necessarily matter, can be bad faith.
The law requires that every party in a contract both (a) act in good faith and deal fairly with the other party or parties and (b) not act in bad faith. Sometimes, the standard of good faith and fair dealing (which includes not acting in bad faith) is described simply as a duty to be both honest and reasonable.
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