Legal Memorandum: Implied Covenant of Good Faith and Fair Dealing

Issue: Under Minnesota law, does the implied covenant of good faith and fair dealing require that a party does not hinder another party’s performance under a contract?

Every contract includes as part of the implied covenant of good faith and fair dealing an “implied condition that each party will not unjustifiably hinder the other from performing.”  In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494, 502 (Minn. 1995); Zobel & Dahl Constr., 356 N.W.2d 42, 46 (Minn. 1984); Midwest Sports Mktg., Inc. v. Hillerich & Bradsby of Canada, Ltd., 552 N.W.2d 254, 268 (Minn. Ct. App. 1996).  Wrongfully repudiating a contract or thwarting the other’s performance by affirmatively blocking the happening of a condition precedent each constitute separate violations of the implied covenant.  Cox v Mortgage Elec. Regis. Sys. Inc., 685 F.3d 663, 671 (8th Cir. 2012).  (“Examples of breach of the duty of good faith and fair dealing by unjustified hindrance include wrongfully repudiating a contract, Wormsbecker v. Donovan Constr. Co. of Minn., 247 Minn. 32, 76 N.W.2d 643, 650 (1956), “avoid[ing] performance by affirmatively blocking the happening of a condition precedent,” In re Hennepin County 1986 Recycling Bond Litig., 540 N.W.2d 494, 502 (Minn.1995).”).  The issue of whether one party has unjustifiably hindered the other’s performance is one of fact presenting a genuine issue for trial.  ConAgra, Inc. v. Seeland, No. C6-00-315, 2000 Minn. App. LEXIS 1034, *3 (Minn. Ct. App. Sep. 27, 2000) (citing Midwest Sports Mktg., Inc. v. Hillerich & Bradsby of Canada, Ltd., 552 N.W.2d 254, 268 (Minn. App. 1996)).  “In Minnesota, ‘every contract includes an implied covenant of good faith and fair […]