## Facts

- United sought bids for its Anchorage in-flight catering work and awarded the contract to Good Taste, Inc., doing business as Saucy Sisters Catering.
- To meet United’s operational requirements, Saucy Sisters substantially expanded its business, spending roughly $1 million on facilities, equipment, and related investments.
- The parties executed a written catering agreement described as a three-year arrangement.
- The agreement included an unambiguous provision allowing either party to terminate the contract without cause upon 90 days’ written notice.
- After approximately one year of performance, United gave Saucy Sisters written notice on May 18, 1989 that it would terminate the agreement effective August 15, 1989, consistent with the contract’s notice requirement.
- Saucy Sisters asserted that United had made pre-contract oral assurances that the no-cause termination provision would be used only in limited circumstances (such as if United ceased flying to Anchorage).

## Issues

1. Under Illinois law, can the implied covenant of good faith and fair dealing restrict an express, unambiguous no-cause termination clause by requiring good cause or a legitimate business reason to terminate?
2. Does terminating a contract pursuant to an at-will/termination-for-convenience clause constitute a breach of the implied covenant when the terminating party complies with the clause’s notice requirement?
3. What is the proper disposition of a verdict imposing implied-covenant liability where the contract expressly permits termination without cause and the jury rejects a related fraud theory?

## Decision

- The Supreme Court of Alaska (applying Illinois law by the parties’ agreement) reversed the judgment for Saucy Sisters on the implied-covenant claim.
- The court held the contract was terminable at will under the express 90-day no-cause termination provision.
- The court held the implied covenant of good faith and fair dealing could not be used to require United to show good cause or a legitimate business reason for termination.
- The court vacated the damages award based on the implied-covenant verdict and remanded for entry of judgment in favor of United.

## Legal Principles

- The implied covenant of good faith and fair dealing applies to contracts but cannot contradict or modify an express, unambiguous contractual term.
- Where a contract expressly permits termination without cause upon specified notice, Illinois law does not permit the implied covenant to impose a good-cause or legitimate-business-reason requirement.
- Compliance with an unambiguous termination-for-convenience clause (including required notice) generally defeats an implied-covenant claim premised on the absence of cause for termination.
- When the factfinder rejects fraud based on alleged pre-contract assurances, those alleged assurances do not supply a basis to override clear written termination rights through the implied covenant.

## Conclusion

Because the parties’ written agreement clearly allowed either party to terminate without cause upon 90 days’ notice, United’s termination in accordance with that provision did not breach the implied covenant of good faith and fair dealing under Illinois law, and judgment was required for United.


United Airlines, Inc. v. Good Taste, Inc., 982 P.2d 1259 (Alaska 1999)