The Obligation of Good Faith and Fair Dealing Versus Hanaway

The Obligation of Good Faith and Fair Dealing Versus Hanaway

Last year, the Pennsylvania Supreme Court, in considering challenges to actions taken by the general partner of a limited partnership, held that the contractual obligation of good faith and fair dealing is not applicable in limited partnership agreements formed under what are now the prior statutes. Characterizing limited partnership agreements as being different than typical contracts, the court found that they do not include the implied contractual covenant of good faith and fair dealing because the controlling Limited Partnership Act did not impose that obligation in limited partnership agreement. This is in contrast with the most modern of those statutes, which expressly incorporates the implied covenant of good faith and fair dealing.

My personal view is that this decision is simply wrong, and that every limited partnership agreement, as a contract, incorporates the obligation of good faith and fair dealing. The Journal of Passthrough Entities last week released my review of the Hanaway decision; HERE IS A LINK to that article.