In a recent ruling that has caught the attention of legal experts, the Tenth Circuit came down on the side of KFC in a contentious dispute with a franchisee over alleged breach of the implied covenant of good faith and fair dealing. The case, Kazi v. KFC US, LLC, 2023 WL 4983119 (10th Cir. Aug. 4, 2023), breaks new ground by stipulating that any claim on good faith and fair dealing ought to be rooted in expectations established by explicit terms of the contract.
By siding with KFC, the Tenth Circuit has fundamentally reshaped how we interpret the expectancy principle in contract law. This edict implies that an expectation created by an unspoken but implied contract term cannot form the basis for a good faith and fair dealing claim.
This ruling significantly narrows the scope of what can be classified as a breach of good faith and fair dealing, serving as a reminder to the legal fraternity of the importance of careful and explicit drafting in contract law to avoid any room for misinterpretation or ambiguity.
This development holds specific implications for franchisors and franchisees, prompting them to be conscientious about the terms they enlist in their contracts and to consider the potential for legal actions stemming from breaches of good faith and fair dealing. It’s a wake-up call that highlights the importance of both clarity in contractual agreements and honoring the contracted terms.
The Tenth Circuit’s decision is sure to be the subject of much discussion. It brings to the forefront the perennial question about the precise balance between the expressed and implied responsibilities entailed in a contract. Needless to say, legal professionals the world over will be closely following the fallout and implications of this ruling in the months to come.