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Court Of Chancery Explains The Implied Covenant Rules

NAMA Properties LLC v. Related WMC LLC, C.A. 7934-VCL (November 17, 2014) This is a virtual treatise on the implied covenant of good faith and fair dealing.  As it points out, the covenant is a gap filler that is to be used rarely and is considered part of the contract. Hence, it does not require a showing of bad faith for it to be violated. Here the court dealt with the duties of an escrow agent. The opinion is also very good at explaining what is required to find a tortious interference with a contract by the parent of a subsidiary. It is often wrongly thought that members of the same corporate family cannot be held liable for the breach of contract by another member of the family for a contract they did not sign. As this decision shows, that may not be so and a parent can be on the hook when it wrongly causes a subsidiary to breach its contract. Share
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