Delaware Business Litigation Report

Explicit Promise of Favorable Financing Not An Implied Obligation

Southern Track & Pump Inc. v. Terex Corp., C.A. No. 08-543-JJF (D. Del. June 9, 2009)

By granting, in part, the defendant’s motion to dismiss its claim for breach of the implied covenant of good faith and fair dealing, the district court found that financing promises may not be regarded as an implied contractual obligation when there is no explicit reference in the agreement.

This dispute arose out of a distributing agreement, whereby the plaintiff agreed to distribute the defendant’s products. By the plaintiff’s account, the defendant represented that it had a relationship with a financier and could leverage this relationship to secure favorable financing. The plaintiff obtained financing and, thereafter, defaulted on its obligation. When the defendant refused to intervene on the plaintiff’s behalf, the plaintiff brought suit for an implied breach. The district court dismissed the plaintiff’s claim to the extent it was based on the alleged explicit promise regarding financing.

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