Answer:
In the case of Kenford Co., Inc. v. County of Erie, 67 N.Y.2d 257 (1986), the key facts revolved around a dispute over a lease agreement between Kenford Company, the petitioner, and the County of Erie, the respondent. Kenford had leased property from the county for a term of 40 years to operate a restaurant and catering facility.
The dispute arose when the county sought to terminate the lease prematurely, invoking a contractual provision that allowed termination for convenience. Kenford argued that such termination without cause violated the implied covenant of good faith and fair dealing.
The central legal issue in the case was whether the termination for convenience clause could be exercised in a manner that was arbitrary or in bad faith. The Court of Appeals of New York held that the county could not exercise its termination rights in a manner that was arbitrary or in bad faith, establishing that even in contracts with termination for convenience clauses, parties are bound by an implied covenant of good faith and fair dealing.
The case set a precedent in contract law, affirming that parties to a contract must act in good faith, even when exercising termination rights explicitly granted by the contract.
