Law for Business 10th Edition by James Barnes,Terry Dworkin,Eric Richards

Exercise 7

Borden, Inc., had a contract to purchase the clams that Sons of Thunder's (SOT) vessels caught. The contract allowed either party to cancel the contract by giving prior notice in writing 90 days prior to the effective date of cancellation. In reliance on Borden's representation that SOT had a five-year contract with it, the bank gave SOT a loan to buy another boat. For most weeks, Borden did not purchase the contractually required number of clams. Borden came under new management, acquired a seafood company and its fishing boats, and brought in a new manager who refused to purchase clams from SOT unless kickbacks were paid. When SOT attempted to sell the clams to other suppliers, Borden charged a fee for shucking equipment it had asked SOT to put on its boats. Borden then sent a letter canceling the contract after 90 days. SOT eventually sued for breach of contract and alleged, among other things, that Borden breached its covenant of good faith and fair dealing through its cancellation. Was Borden's cancellation in bad faith and, therefore, in breach of the duty of good faith and fair dealing, even though it was not in breach of a specific contract term?