United Airlines, Inc. v. Good Taste, Inc.

Brief Fact Summary.

Good Taste, Inc. sued United Airlines, Inc. (United) under the covenant of good faith and fair dealing when terminated a catering contract with 90 days notice.

Synopsis of Rule of Law.

The covenant of good faith and fair dealing does not require parties to have cause to terminate an agreement that can be terminated at will.

Facts.

United Airlines, Inc. (United) solicited Good Taste, Inc. (Good Taste) to submit a bid for catering and awarded a contract to Good Taste. Good Taste spent $1 million to perform its obligations under the contract. The contract had a provision that allowed either party to terminate the contract anytime with 90 days notice. United terminated the contract within one year and Good Taste subsequently sued. Judgment was granted for Good Taste.

Issue.

Whether the covenant of good faith and fair dealing requires parties to have cause to terminate an agreement that can be terminated at will?

Held.

No. The judgment of the trial court is reversed. Requiring good cause to terminate the contract would violate the termination-for-convenience clause of the contracts. A covenant of good faith and fair dealing is only violated when an at-will agreement is terminated at-will.

Discussion.

The covenant of good faith and fair dealing does not require parties to have cause to terminate an agreement that can be terminated at will. Although the covenant of good faith and fair leaving applies to every contract, the covenant cannot modify the terms of the contract.