Opinion ID: 2273298
Heading Depth: 2
Heading Rank: 1

Heading: The Scope Of The Implied Covenant

Text: The covenant is best understood as a way of implying terms in the agreement, whether employed to analyze unanticipated developments or to fill gaps in the contract's provisions. [42] As the majority opinion correctly states, ordinarily the implied covenant doctrine will not be employed to invalidate conduct expressly authorized by the contract itself. [43] But, that principle is not global in its application. The grant of an unqualified contractual right is not, nor can it be, a green light that authorizes the right holder to exercise its power in an arbitrary or unreasonable way. [44] The exercise of any contractual right is limited by the implied duty to act reasonably and in good faith. [45] Accordingly, a contracting party's conduct, even if in literal compliance with [contract] and statutes, can breach the implied covenant if that party acts arbitrarily or unreasonably. [46] The complaint alleges no facts from which it may reasonably be inferred that the plaintiffs contractually agreed to waive their implied right to be treated fairly by the Company in any redemption of their shares. Their claim that Booz Allen breached the implied covenant by exercising its power to redeem the plaintiffs' shares in the circumstances alleged here was, therefore, legally cognizable. Whether or not that claim will ultimately be validated must await the development of a factual record. That is why Count I was erroneously dismissed.