Delaware Business Litigation Report

Delaware Recognizes New Defense to Contract Claims

In what the Court itself noted is an unprecedented decision for Delaware, the Delaware Superior Court has ruled that a defendant in a contract case may plead as a defense that the plaintiff violated the implied covenant of good faith and fair dealing. This decision in Daystar Construction Management Inc. v. Mitchell has particularly broad implications because of the wide-spread adoption of Delaware law as the choice of law in contracts. The Court noted that it is rare for the covenant to be used as a defense to a breach of contract claim. However, the Court's decision cited to an impressive list of sources in its detailed and thoughtful analysis. Given that the Court also held that the breach of covenant is an affirmative defense that must be specifically plead to be asserted, a review of the decision is now mandatory for any defense of a contract case governed by Delaware law. Share