Duty of Good Faith and Fair Dealing Imposed
Kegler Brown Construction Newsletter August 1, 2001
Riding out of the Rocky Mountains like a cool breeze comes a case from Wyoming's Supreme Court finding that general contractors owe a duty of good faith and fair dealing to subcontractors under commercial construction contracts. Scherer Construction v. Hedquist Construction, 2001 WY 23, 18 P.3d 645 (2001).
In that case, a public owner decided to order a "value-engineering" change from asphalt paving to concrete, which was then passed through by the contractor to the subcontractor - deleting approximately 80% of the subcontractor's original scope of work. The subcontractor successfully argued that every construction contract in Wyoming - including the subcontract here - should contain an implied covenant of good faith and fair dealing. The Wyoming Supreme Court agreed that §205 of the Restatement (Second) of Contracts should be adopted and therefore a duty of good faith and fair dealing should apply to all commercial contracts.
This case should give parties to construction contracts an additional tool to utilize when unfair contract language might otherwise bar an equitable recovery — particularly in states which recognize the implied covenant of good faith and fair dealing.