A unanimous Michigan Supreme Court held in Kircher v. Boyne USA, Inc. (Docket No. 166459, March 27, 2025) that the implied covenant of good faith and fair dealing neither overrides nor replaces any express contractual term. The court also reaffirmed that there is no independent cause of action for breach of the implied covenant of good faith and fair dealing in Michigan.
In Kircher, plaintiff and defendants agreed to use a formula to calculate the redemption price of plaintiff’s stock shares in a company. After that formula produced a negative redemption price, plaintiff sued defendants alleging that defendants refused to use an alternative formula in breach of the parties’ contract. The court held that the implied covenant of good faith and fair dealing could not sustain plaintiff’s claim, reversing the Court of Appeals.
The parties agreed to use a negotiated formula that unambiguously tied plaintiff’s redemption price to the company’s EBITDA and debt. Because the parties “unmistakably expressed their respective rights” regarding the redemption price calculation, the Court of Appeals erred by holding that defendants were contractually obligated to use a different formula under the implied covenant of good faith and fair dealing.
Litigants often attempt to use the covenant of good faith as a sword when they feel they have been treated unfairly despite a contract’s clear terms. Kircher further armors a contract’s unambiguous terms from such an attack and solidifies Michigan’s longstanding position that the implied covenant of good faith and fair dealing is not an independent claim and cannot be used to rewrite a contract.
Attorneys at Wolfson Bolton Kochis PLLC have extensive experience handling complex contract litigation across numerous industries. We can help you:
- Draft and negotiate contracts with clear, enforceable terms;
- Resolve disputes involving express and implied contract obligations;
- Defend your business in litigation over unfairness or bad faith claims; and
- Protect your contractual rights in court.
If you have concerns about how this ruling might impact your agreements—or if you’re facing a contractual dispute—reach out to the team at Wolfson Bolton Kochis PLLC. We’re here to protect your rights and help you enforce what your contracts clearly say.
