Hobin v. Coldwell Banker Residential Affiliates, Inc.
N.H. S. Ct. 2000

Parties

Plaintiff - Hobin - real estate agent/franchisee

Defendant - Coldwell Banker (CB) - real estate franchiser

Facts

Hobin contacted CB about becoming one of its franchisees. At that time the nearest CB affiliate office was 5 ½ miles away. Hobin felt he could only be successful if no other office expanded into his area (within the 5 ½ miles). Hobin discussed these concerns with the CB recruiter, who implied that there was no possibility of CB placing an additional franchise in Hobin's area. The recruiter also told him that CB's policies for awarding franchises would not permit them to put one where it might jeopardize an existing office's business. The parties then entered into an agreement. However, the agreement was non-exclusive and expressly permitted CB to place franchises wherever they wanted. The following year, a CB affiliate expanded into Hobin's area, opening two franchises within the 5 ½ miles. Hobin then sued CB for breach of contract and breach of implied covenant of good faith and fair dealing.

Relief Requested

Hobin brought a petition for injunctive relief against CB (seeking to enjoin the continued grant of a franchise in his area).

Procedural History

Trial court dismissed for failure to state a claim (the thing that Hobin was complaining of - placing an additional franchise in his area - is expressly permitted in the franchise agreement). Hobin appealed.

Issue on Appeal

Did trial court err in dismissing Plaintiff's claim of breach of implied covenant of good faith and fair dealing?

(Did CB breach the implied covenant of good faith and fair dealing by placing additional franchises in Hobin's area?)

Judgment

Affirmed. (No).

Rule of Law

The implied covenant of good faith and fair dealing cannot be read to vary the express terms of a contract.

Reasoning

Although the implied covenant of good faith and fair dealing should limit the exercise of discretionary power, an implied covenant must never be read to vary the express terms of a contract. The law refuses to read into contracts anything by implication except upon grounds of obvious necessity.

There are situations where the court cannot imply a covenant of good faith and fair dealing because regardless of how discretionary power is exercised, the agreement is supported by adequate consideration. In consideration of Hobin's agreement to purchase a CB franchise, his business accrued numerous benefits stemming from its association with a nationally recognized real estate marketing organization. These benefits included, among others, chain association, rights to the CB trademark, promotional campaigns, national and regional advertising, on-going training, operating advice and assistance, and centralized programs. Whether or not CB properly exercised its discretion in placing an additional franchise in Hobin's area, Hobin retained the right to the contractual benefits (set forth above).