ABSTRACT
Section 205 of the Restatement (Second) of Contracts declares that every contract imposes a duty on the parties to act in good faith toward and deal fairly with their counterparties. Over the past forty-five years, courts in most states have accepted that declaration as black-letter law, yet have never clearly articulated what the duty actually means. The Restatement drafters envisioned something ambitious: an affirmative covenant that would permit courts to police opportunism by imposing and enforcing community standards of decency, fairness, and reasonableness. Today, that view of the implied covenant is a myth. It persists as legend, but not in the doctrine’s application in major US jurisdictions. Dragged from its cave, the fire-breathing, implied-covenant dragon turns out to be a tamed and useful animal. Courts deploy it for the pedestrian purpose of implying terms necessary to give effect to the contract’s express provisions, and sometimes to constrain extreme examples of opportunism. Drawing on the doctrine’s history, the law of several jurisdictions, and interviews with deal lawyers, this article reveals the dragon for what it is, despite what it may be called.
West, Glenn D and Laster, J Travis and Gulati, Mitu, The Dragon Who Wasn’t (August 5, 2026), Virginia Public Law and Legal Theory Research Paper Forthcoming.
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