Sunday, December 1, 2013

Centronics Corporation v. Genicom Corporation case brief

Centronics Corporation v. Genicom Corporation case brief summary
562 A.2d 187 (1989)

A contract between plaintiff buyer and defendant seller provided for arbitration of disputes on the price and required an escrow deposit of a portion of the price pending final valuation. The seller alleged that the buyer breached an implied covenant of good faith in refusing to release an undisputed portion of the escrow fund. A trial court of Hillsborough County (New Hampshire) granted summary judgment in favor of the buyer.

When the arbitration dragged on, the seller sought an escrow distribution in an amount that the seller claimed was in excess of what would be the eventual purchase price. When the buyer refused, the seller charged the buyer with breach of an implied covenant of good faith. The trial court found that the contract did not require the buyer to agree to a distribution during arbitration and that the seller was merely seeking to revise the contract.


  • On appeal, the court affirmed. 
  • The court found that the implied obligation of good faith at common law set limits on discretion in contractual performance. 
  • The contract did not confer such discretion on the buyer over the timing of distributions from the fund that, in the absence of some good-faith limitation, it could deny the seller a substantial proportion of the contract's benefit. 
  • To the contrary, the contract contained express and unequivocal provisions governing the timing of payment. 
  • The buyer had no discretion to withhold approval or to affect the timing of the arbitration. 
  • Alternatively, the buyer's refusal was not bad faith as an exercise of discretion meant to recapture an opportunity foregone at the creation of the contract.

The court affirmed the judgment of the trial court.

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