## Facts

- Centronics agreed to sell certain business assets to Genicom, with the final purchase price tied to the value of transferred property.
- The contract required valuation disputes to be resolved by arbitration.
- Genicom deposited part of the purchase price into escrow; the escrow agent could disburse funds only upon (a) instruction from counsel for both parties or (b) the final purchase price determination by arbitration.
- A valuation dispute arose and arbitration commenced.
- While arbitration was pending, Centronics demanded a partial escrow release for amounts it viewed as undisputed.
- Genicom refused to authorize any interim disbursement, citing the contract’s escrow-release conditions.
- Centronics sued for breach of contract and breach of the implied covenant of good faith and fair dealing based on the refusal to approve an interim release.
- The trial court granted summary judgment for Genicom; Centronics appealed only the implied-covenant claim and abandoned any claim that Genicom delayed arbitration.

## Issues

1. Whether Genicom’s refusal to consent to an interim escrow release during pending arbitration breached the implied covenant of good faith and fair dealing.
2. Under New Hampshire law, when does the implied covenant limit a party’s discretion in performing a contract without contradicting express terms?

## Decision

- The New Hampshire Supreme Court affirmed summary judgment for Genicom.
- The court held Genicom did not breach the implied covenant because its refusal was consistent with the contract’s express escrow-disbursement provisions.
- The court concluded the agreement did not confer on Genicom the sort of performance discretion that could deprive Centronics of a substantial portion of the contract’s value.
- The court declined to add a partial-payment mechanism that the parties did not bargain for.

## Legal Principles

- New Hampshire recognizes multiple good-faith doctrines serving different functions rather than a single, unitary rule.
- Three categories of implied good-faith obligations include: (1) good faith in contract formation (misrepresentation/correction of error), (2) limits on bad-faith termination in at-will employment, and (3) limits on abuse of discretion in contract performance.
- In performance, good faith is implied only when a contract gives one party discretion broad enough to risk depriving the other of a substantial proportion of the agreement’s value; the discretion must then be exercised within reasonable limits consistent with the contract’s purposes.
- The implied covenant operates as a gap-filler; it does not override or contradict clear, unambiguous contractual language or supply missing terms merely because one party later prefers them.
- A performance-based good-faith claim commonly turns on whether the defendant had relevant discretion, whether the parties intended a binding contract, whether the discretion was exercised unreasonably, and whether the complained-of harm was caused by an abuse of that discretion.

## Conclusion

Because the escrow agreement expressly conditioned disbursement on joint counsel instructions or the final arbitral price determination, Genicom’s refusal to authorize interim payment did not constitute an abuse of contractual discretion, and the implied covenant could not be used to create a partial-release right absent from the parties’ bargain.


Centronics Corp. v. Genicom Corp., 132 N.H. 133, 562 A.2d 187 (N.H. 1989)