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Transmed Ambulance Transport, Inc v. Matuska

A-4185-98T5 (N.J. Super. App. Div. 2000) (Unpublished)

CONTRACTS; GOOD FAITH—The implied covenant of good faith and fair dealing does not replace or supplant a specific contract provision authorizing a party to terminate the contract.

An ambulance service complained that its contract with a hospital was improperly terminated and that its replacement by a competitor interfered with its contractual rights. The complaining company had provided ambulance services to the hospital even before it had a formal contract. When its contract was issued, it was for a two year term, but contained the following provision: “This agreement may be terminated upon 60 days notice by either party by Certified Mail, Return Receipt Requested.” Even though there were no complaints about the service, the hospital’s president decided to give the business to an ambulance service that was owned by the son of a hospital board member. After confirming that the hospital had the right to terminate its contract on 60 days notice, the president showed the competitor a copy of the existing contract and asked whether the competitor could match or better its prices. When the competitor said that it could, the hospital gave the complaining ambulance provider the termination notice required by the contract, and proceeded to contract with the competitor. The complaining business claimed that the action of the hospital in terminating its contract constituted a breach of the implied covenant of good faith and fair dealing, but the Court held that the “implied covenant cannot replace or supplant a specific contract provision authorizing one party to terminate the contract.” In doing so, it quoted precedent specifying that, “in our state, it is the law that where a party to a contract follows an agreement or provision in a contract regarding the termination of that contract, its motives or reasons for terminating the contract are irrelevant… .” The Court distinguished between the right to terminate a contract and the obligation to perform the contract fairly and in good faith before it has been terminated. Here, the contract was clear and unambiguous. It provided that either party could terminate the contract on sixty days’ notice. As to the complaining ambulance service’s claim against the competitor, the Court believed that the competitor could not be found to have induced the hospital to “breach” the hospital’s contract with the original service, because there was no “breach” of contract. There was no suggestion of any improper action by either the hospital or the competing ambulance service before termination of the hospital’s contract. The disappointed ambulance company alleged that it was improper for the hospital and the hospital’s president to show the contract to the competitor. However, it acknowledged that neither the contract nor anything in the contract constituted a trade secret. It also could show nothing to be “confidential” and the Court therefore found nothing improper in the hospital or its president telling the competitor that it would consider engaging it to provide ambulance services if it could meet existing prices. The hospital was not a municipal corporation required to engage in structured, public bidding and there was no reason why it could not favor a member of its board of trustees if it chose to do so.


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