## Facts

- Consumers International, Inc. (CI), a food-service distributor, entered a written Master Distribution Agreement with Sysco Corporation (Sysco), a national supplier.
- The agreement required Sysco to supply at least 80% of the products CI distributed to its customers.
- The contract included an express termination-at-will provision allowing either party to terminate the agreement on 60 days’ prior written notice.
- Sysco sent CI a letter terminating the agreement and provided 60 days’ notice; the letter stated no reason.
- CI alleged substantial economic harm because it had built its business around the Sysco relationship.
- The record contained no evidence of fraud, deception, or other improper motive apart from Sysco’s decision to terminate under the contract’s express terms.

## Issues

1. Whether the implied covenant of good faith and fair dealing converts an express termination-at-will clause in a commercial contract into a requirement that termination occur only for good cause.
2. Whether exercising an unconditional contractual termination right, without additional evidence of independently wrongful conduct, can constitute a breach of the implied covenant.

## Decision

- The Arizona Court of Appeals affirmed summary judgment for Sysco.
- The court held the implied covenant of good faith and fair dealing does not override or rewrite an unambiguous termination-at-will clause.
- Because the contract permitted termination on 60 days’ notice without cause, CI could not use the implied covenant to impose a “good cause” limitation.
- In the absence of evidence of independent bad-faith conduct beyond termination itself, Sysco’s termination on notice was lawful.

## Legal Principles

- Every Arizona contract contains an implied covenant of good faith and fair dealing, requiring that neither party act to deprive the other of the benefits of the agreement.
- The implied covenant cannot contradict or vary clear, express contractual terms, including an unconditional termination-on-notice provision.
- “Justified expectations” are defined by the contract’s express allocation of rights and risks; where the contract allows termination without cause, continued dealings beyond the notice period are not a protected contractual benefit.
- A viable implied-covenant claim generally requires conduct that is independently wrongful or opportunistic in a way that defeats other contract benefits, not merely the exercise of an expressly granted termination right.

## Conclusion

The court enforced the contract’s express termination-at-will clause and held that the implied covenant of good faith and fair dealing does not supply a good-cause requirement for termination where the agreement unambiguously permits termination on notice and the terminating party engages in no independent bad-faith conduct.


Consumers Int'l, Inc. v. Sysco Corp., 191 Ariz. 32, 951 P.2d 897 (Ct. App. 1997)