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Nevada Law Library

Breach Of Implied Covenant Of Good Faith And Fair Dealing - Tort

In Nevada, the elements for a tort claim of breach of the covenant of good faith and fair dealing are:

1.         Existence of a valid contract;

2.         Every contract in Nevada contains an implied covenant to act in good faith in performance and enforcement of the contract;

3.         Justifiable expectation by the plaintiff to receive certain benefits consistent with the spirit of the agreement;

4.         Defendant performed in a manner that was in violation of or unfaithful to the spirit of the contract (the terms of the contract are complied with in a literal sense, but the spirit of the contract is breached);

5.         The existence of a special relationship of trust between the plaintiff and defendant;

6.         Unfaithful actions by the defendant were deliberate;

7.         Causation and damages; and

8.         Punitive Damages.

NRS 104.1203; NRS 104.1304; NRS 104.1201(t); Klein v. Freedom Strategic Partners, LLC, 595 F. Supp. 2d 1152 (D. Nev. 2009); George v. Morton, No. 2:06-CV-112-PMP-GWF, 2007 WL 680788, at *8 (D. Nev. 2007); Nelson v. Heer, 123 Nev. 217, 163 P.3d 420 (2007); Ins. Co. of the W. v. Gibson Title Co., Inc., 2006 WL 1278706 (May 11, 2006); State, University and Community College System v. Sutton, 120 Nev. 972, 989, 103 P.3d 8, 19 (Nev. 2004); Frantz v. Johnson, 116 Nev. 455, 465 n. 4, 999 P.2d 351, 358 n. 4 (2000); Great Amer. Ins. Co. v. Gen. Builders, Inc., 113 Nev. 346, 354, 934 P.2d 257 (1997); Perry v. Jordan, 111 Nev. 943, 900 P.2d 335 (1995); Hilton Hotels Corp. v. Butch Lewis Prod., Inc., 107 Nev. 226, 808 P.2d 919 (1991); A. C. Shaw Constr. v. Washoe County, 105 Nev. 913, 784 P.2d 9 (1989);  Restatement (Second) of Contracts § 205 provides, “[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.”  K-Mart Corp. v. Ponsock, 103 Nev. 39, 48 n.8, 732 P.2d 1364, 1370 (1987) (citing Restatement (Second) of Contracts ).  The breach of the covenant is sometimes referred to as a “contort” because there are two distinct causes of action recognized—one sounding in contract and the other sounding in tort.  Matthew J. Barrett, Note, “Contort”: Tortious Breach of the Implied Covenant of Good Faith in Fair Dealing in Non-Insurance, Commercial Contracts - Its Existence and Desirability, 60 Notre Dame L. Rev. 510, 512 (1985); see also Gruenberg v. Aetna Ins. Co., 9 Cal.3d 566, 510 P.2d 1032, 1040, 106 Cal. Rptr. 480, 484 (1973).