Centronics Corporation v. Genicom Corporation
Supreme Court of New Hampshire
562 A.2d 187 (1989)
Centronics Corporation (plaintiff) contracted to sell business assets to Genicom Corporation (defendant), with the purchase funds held in escrow pending resolution of a dispute over the property's value, which the contract sent to arbitration. While arbitration was pending, Centronics demanded a partial release of undisputed escrow funds; Genicom refused, relying on contract language that funds would not be released until arbitration concluded. Centronics sued, claiming Genicom's refusal to authorize a partial payment breached an implied duty of good faith and fair dealing. The trial court held that because the contract contained no provision requiring partial payment, there was no such duty to breach, and Centronics appealed.
Whether, under an agreement that gives one party discretion sufficient to deprive the other party of a substantial proportion of the agreement's value, the parties' intent to be bound by an enforceable contract creates an implied duty of good faith limiting how that discretion is exercised.