Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
Author: Scarinci Hollenbeck, LLC
Date: July 29, 2015
The Firm
201-896-4100 info@sh-law.comThis implied covenant has come up many times in both sports and entertainment law. Most recently, the implication of good faith and fair dealing has been the subject of discussions in the Miss USA Pageant. Univision, and later NBC, dropped the pageant, owned by Donald Trump, after the business magnate and presidential candidate made disparaging comments about Mexican immigrants. Trump has filed a lawsuit against Univision, and has threatened one against NBC, because he believes the networks breached the implied covenants of good faith and fair dealing in contracts giving them the right to air the pageant, according to The Hollywood Reporter.
This implied covenant comes up in entertainment and sports law, where agreements aren’t always as strong as they could be, and are subject to the behavior of both parties – whom are often placed under societal magnifying glasses due to their celebrity status.
So what is an implied covenant of good faith and fair dealing? Essentially, it is the assumption that when a contract is signed, each party will deal with the other fairly, honestly and in good faith. This means that if one party uses “shifty means” to avoid responsibilities, violates the agreement or denies what the other party understood to be part of the deal, then the implied covenant has been broken. As mentioned, Trump’s pending lawsuit against Univision isn’t the first time this has come up in the sports and entertainment worlds, and it likely won’t be the last.
Smaller-scale implied covenant breaches can lead to legal action as well. Sunny Brenner, a partner at a Los Angeles law office, wrote about good faith and fair dealing in entertainment and sports in the ALM’s Law Journal Newsletters. In the case he described, he represented a film production company that was suing a visual-effects provider. The contract between the two parties required that the effects provider create for the production company “first class digital visual effects.” However, nowhere in the agreement was an explanation given for what exactly these sort of effects would look like.
The provider was not offering the production company the quality effects it had expected, and was asked to invest in upgrades that would essentially allow it to put together the first class effects it promised to provide. However, the effects-provider refused to pay for these upgrades, and arbitrators, reluctant to break down the meaning of “first class digital visual effects,” instead based their decision on the implied covenant of good faith and fair dealing. It was decided that, though the contract didn’t require the effects-provider to invest in upgrades, it did mandate that the company manufacture “first class digital visual effects,” which was only possible through upgrades. Thus, the investments the effects-provider was asked to make were required under the implied covenant of good faith and fair dealing.
The implied covenant of good faith and fair dealing has become an important part of U.S. contract law. The concept arose in a 1933 case, The Kirke La Shelle Company, Appellant, v. The Paul Armstrong Company et al.
The New York Court of Appeals stated “neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing.”
Since then, the implied covenant was incorporated into the Uniform Commercial Code, ensuring the concept is recognized in cases across the country. Any agreement in sports and entertainment should be made with the knowledge that there is an implied covenant of good faith and fair dealing. Attempts to get out of or subvert the deal in any way could appear as a breach of that covenant, and lead to legal action.
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Most New Jersey business owners purchase insurance policies, file them away, and assume they are protected if a claim arises. Without a regular insurance coverage review, many companies discover gaps only after a lawsuit, cyberattack, property loss, or other significant event occurs. An annual insurance coverage review can help businesses identify potential risks, ensure their […]
Author: George McGowan

Businesses and individuals often encounter situations where another party breaches a contract, fails to pay a debt, or continues harmful conduct. In many such disputes, a precisely drafted demand letter or cease-and-desist letter serves as a powerful legal tool. It can frequently resolve the dispute and avoid litigation. While demand or cease-and-desist letters can resolve […]
Author: George McGowan

Key provisions in your contracts, including those relating to indemnification, insurance, and defense, are essential to contract risk management. While sometimes considered “boilerplate,” these provisions play a pivotal role when determining which party is responsible for certain costs and liabilities. They must always be negotiated and drafted carefully. Indemnification Clauses Businesses should never overlook the […]
Author: George McGowan

Portability of estate and gift tax enables a surviving spouse to inherit any unused portion of their deceased spouse’s federal estate and gift tax exemption. So, if one spouse doesn’t utilize their full exemption, the surviving spouse can effectively double their exemption amount with regard to estate tax liability. For married couples, portability offers a […]
Author: Marc J. Comer

For many of us, pets are more than companions—they are members of the family. Yet they are often overlooked or inadequately provided for when it comes to estate planning. A pet trust offers a legally enforceable way to ensure that your animal continues to receive proper care if you become incapacitated or pass away. As […]
Author: Marc J. Comer

For many New Jersey business owners, a closely held company represents decades of work, financial investment, and personal sacrifice. Trusts in business succession planning are one of the most effective tools for protecting that value, allowing founders to control how and when the business passes to the next generation while reducing the risk of disputes, […]
Author: George McGowan
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!