The implied covenant of good faith is a legal principle that requires parties to a contract to act honestly and fairly towards each other, ensuring that both parties fulfill their contractual obligations without undermining the other's rights. This covenant serves as a safeguard against arbitrary or capricious behavior and helps maintain mutual trust between the contracting parties. It operates in conjunction with the doctrines of illusory promises and mutuality of obligation, ensuring that even if specific terms are vague or unfulfilled, the overall intent of fairness is upheld.
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