Opinion ID: 1364919
Heading Depth: 1
Heading Rank: 3

Heading: mutual breach of the covenant of good faith and fair dealing

Text: In answering Story's amended complaint, the City counterclaimed for breach of contract and breach of the covenant of good faith and fair dealing against Story. It based this counterclaim on its assertion that Story used fraud and deceit to capitalize on the typographical error. The City argues that the District Court erred in refusing its proposed instruction on the mutual breach of the duty of good faith and fair dealing, which stated: If both parties have breached the implied covenant of good faith and fair dealing, neither can recover on it. The City cites the case of Los Angeles Coliseum Comm'n v. N.F.L. (9th Cir.1986), 791 F.2d 1356, in support of its instruction. In Barrett v. ASARCO, Inc. (1988), 234 Mont. 229, 238, 763 P.2d 27, 33, we relied on the Ninth Circuit Court of Appeals' decision in Los Angeles Coliseum in determining that the covenant of good faith and fair dealing was a two-way street. Barrett, 763 P.2d at 32. We stated that, in the employment context, an employee who breaches his or her duty of good faith and fair dealing may not then complain of unfair dealing by the employer. However, we quoted the Ninth Circuit's caveat in Los Angeles Coliseum that this rule has a narrow application, and stated: We emphasize that our ruling does not embrace a broad rule whereby any two breaches of the implied good faith promise by opposing contracting parties constitute offsetting penalties which cancel each other out; our ruling applies only to factual contexts such as the present one, where both breaches concerned the same issue and occurred during one episode of the contractual relationship. Barrett, 763 P.2d at 33 (emphasis added). Neither Los Angeles Coliseum nor Barrett supports the broad statement of law offered by the City in its proposed instruction. We conclude, therefore, that the District Court did not err in refusing the City's proposed instruction on mutual breach of the covenant of good faith and fair dealing.