California Civil Jury Instructions (CACI)

2423. Breach of the Implied Covenant of Good Faith and Fair Dealing - Essential Factual Elements

[Name of plaintiff] claims that [name of defendant] violated the duty to act fairly and in good faith. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of plaintiff] and [name of defendant] entered into an employment relationship;

2. That [name of plaintiff] substantially performed [his/her] job duties [unless [name of plaintiff]'s performance was excused [or prevented]];

3. That [name of defendant] [specify conduct that plaintiff claims prevented him/her from receiving the benefits that he/ she was entitled to have received under the contract];

4. That [name of defendant]'s conduct was a failure to act fairly and in good faith; and

5. That [name of plaintiff] was harmed by [name of defendant]'s conduct.

Both parties to an employment relationship have a duty not to do anything that prevents the other party from receiving the benefits of their agreement. Good faith means honesty of purpose without any intention to mislead or to take unfair advantage of another. Generally speaking, it means being faithful to one's duty or obligation.

Directions for Use

If the existence of a contract is at issue, see instructions on contract formation in the 300 series.

This instruction must be completed by inserting an explanation of the conduct that violated the duty to act in good faith.

The element of substantial performance should not be confused with the "good cause" defense: "The action is primarily for breach of contract. It was therefore incumbent upon plaintiff to prove that he was able and offered to fulfill all obligations imposed upon him by the contract. Plaintiff ailed to meet this requirement; by voluntarily withdrawing from the contract he excused further performance by defendant." (Kane v. Sklar (1954) 122 Cal.App.2d 480, 482 [265 P.2d 29], internal citation omitted.) Element number 2 may be deleted if substantial performance is not an issue.

Do not give this instruction if the alleged breach is only the termination of an at-will contract. (See Eisenberg v. Alameda Newspapers, Inc. (1999) 74 Cal.App.4th 1359, 1391 [88 Cal.Rptr.2d 802].)

Sources and Authority

Restatement Second of Contracts, section 205, provides: "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Comment (a) to this section provides, in part: "The phrase 'good faith' is used in a variety of contexts, and its meaning varies somewhat with the context. Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving 'bad faith' because they violate community standards of decency, fairness or reasonableness. The appropriate remedy for a breach of the duty of good faith also varies with the circumstances."

Civil Code section 1439 provides, in part: "Before any party to an obligation can require another party to perform any act under it, he must fulfill all conditions precedent thereto imposed upon himself; and must be able and offer to fulfill all conditions concurrent so imposed upon him on the like fulfillment by the other party. . . ."

"We therefore conclude that the employment relationship is not sufficiently similar to that of insurer and insured to warrant judicial extension of the proposed additional tort remedies in view of the countervailing concerns about economic policy and stability, the traditional separation of tort and contract law, and finally, the numerous protections against improper terminations already afforded employees." (Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 693 [254 Cal.Rptr. 211, 765 P.2d 373].)

"The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made. The covenant thus cannot " 'be endowed with n existence independent of its contractual underpinnings.' " It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement." (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 349-350 [100 Cal.Rptr.2d 352, 8 P.3d 1089], internal citations omitted.)

"A breach of the contract may also constitute a breach of the implied covenant of good faith and fair dealing. But insofar as the employer's acts are directly actionable as a breach of an implied-in-fact contract term, a claim that merely realleges that breach as a violation of the covenant is superfluous. This is because, as we explained at length in Foley, the remedy for breach of an employment agreement, including the covenant of good faith and fair dealing implied by law therein, is solely contractual. In the employment context, an implied covenant theory affords no separate measure of recovery, such as tort damages." (Guz, supra, 24 Cal.4th at p. 352, internal citation omitted.)

"Where there is no underlying contract there can be no duty of good faith arising from the implied covenant." (Horn v. Cushman & Wakefield Western, Inc. (1999) 72 Cal.App.4th 798, 819 [85 Cal.Rptr.2d 459].)

"We do not suggest the covenant of good faith and fair dealing has no function whatever in the interpretation and enforcement of employment contracts. As indicated above, the covenant prevents a party from acting in bad faith to frustrate the contract's actual benefits. Thus, for example, the covenant might be violated if termination of an at-will employee was a mere pretext to cheat the worker out of another contract benefit to which the employee was clearly entitled, such as compensation already earned." (Guz, supra, 24 Cal.4th at p. 353, fn. 18.)

"The reason for an employee's dismissal and whether that reason constitutes bad faith are evidentiary questions most properly resolved by the trier of fact." (Luck v. Southern Pacific Transportation Co. (1990) 218 Cal.App.3d 1, 26 [267 Cal.Rptr. 618], internal citations omitted.)

Secondary Sources

4 Wilcox, California Employment Law, Ch. 60, Liability for Wrongful Termination and Discipline, §§ 60.02[2][c], 60.06 (Matthew Bender)

1 Wrongful Employment Termination Practice (Cont.Ed.Bar 2d ed. 1997) Contract Actions, §§ 8.27-8.28

21 California Forms of Pleading and Practice, Ch. 249, Employment Law: Termination and Discipline, § 249.14 (Matthew Bender)

Bancroft-Whitney's Cal. Civil Practice: Employment Litigation (1993) Termination of Employment, §§ 6:20-6:21

(New September 2003)