By Sam Laurin, Bose McKinney & Evans LLP
Unless a contract expressly provides that the parties will act in good faith, or the contract is governed by the U.C.C., Indiana courts have generally not implied a duty to act in good faith unless there is an insurance contract. In the recent case of Old National Bank v. Kelly et. al. 31 N.E.2d 522 (Ind. Ct. App 2015), the Indiana Court of Appeals held that there was a genuine issue of fact as to whether a bank breached a duty of good faith with depositors.
The Indiana Court of Appeals based its decision in part on the following language from the Indiana Supreme Court in First Federal Savings Bank of Indiana v. Key Markets Inc. 599 N.E.2d 600, 604 (Ind. 1990): “It is only where the intentions of the parties cannot be readily ascertained because of ambiguity or inconsistency in the terms of the contract or in relation to extrinsic evidence that a court may have to presume the parties were acting reasonably and in good faith in entering into the contract.”
The decision in First Financial is often cited in opposition to reading a duty of good faith in a contract. A Petition to Transfer has been filed in Old National. If the Court of Appeals' decision in Old National stands, then arguably it provides a new basis to argue, in some instances, that a court should read a duty of good faith into a contract.
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