On June 24, 2026, Vice Chancellor Laster of the Delaware Court of Chancery issued an opinion clarifying when and how the implied covenant of good faith and fair dealing can supply omitted terms to fill gaps in commercial agreements. The decision in Facilities Holdings, LLC v. ASM Global Parent, LLC, C.A. No. 2025-0670-JTL is essential reading for dealmakers, commercial contracting parties, and litigators navigating disputes over contractual silence.

Background

The dispute arose from a long-standing concession relationship between a food and beverage vendor and a venue operator. The parties' master agreement gave the vendor the exclusive right to provide concession services at multiple venues, including OVO Arena Wembley in London and the Hawai'i Convention Center in Honolulu. Under the agreement, the vendor could extend its concession agreements, but after a sale of the operator, any extension required landlord consent.

In August 2024, a competitor of the vendor — Legends Hospitality — acquired the operator for $2.325 billion. Following the acquisition, the vendor alleged that the operator's new owners, financially incentivized to replace the vendor with their own concession operation, secretly worked behind the scenes to persuade landlords to withhold consent for extensions. The vendor alleged that the operator excluded it from landlord discussions, delayed transmitting extension proposals, raised pretextual service concerns, and jumped at the first opportunity to declare that consent had been denied.

The Court's Three-Part Framework

As the Delaware Supreme Court held in its en banc opinion in Johnson & Johnson v. Fortis Advisors LLC, No. 490, 2024, (Del. Jan. 12, 2026), the implied covenant operates primarily in two situations: (1) when the contract allocates discretionary authority to one party over a central aspect of a contract, and, as a result, the grant of such discretion is conditioned on the party operating with “sincerity, honesty, fair dealing and good faith”; and (2) when the implied covenant is used to address unforeseen developments or contingencies that neither party anticipated nor resolved by contract which threaten the parties’ bargained-for economic expectations (i.e., gap filling). Here, the Court of Chancery addressed the latter situation and provided a thorough restatement of Delaware's approach to implied covenant claims based on omitted contractual terms. The Court set out a three-part inquiry that a court must undertake when a party invokes the implied covenant to supply a missing term:

Step One — Identify a Gap. The court first determines whether the contract's express language covers the issue at hand. If it does, the implied covenant cannot apply. If the contract is silent, there is a gap the implied covenant might fill. 

Step Two — Determine Whether the Gap Should Be Filled. Not all gaps warrant gap-filling. A gap may exist because the parties negotiated over a term and rejected it, in which case the implied covenant should not be used to grant a party what it failed to obtain at the bargaining table. Gaps may also exist for other reasons — including a desire to let default legal principles apply, strategic ambiguity, sheer contractual complexity, or resource constraints. The Court emphasized that the test is not whether the contingency literally "could not be anticipated," as that standard would be impossible to meet. Instead, the question is whether the parties realistically could have addressed the contingency, accounting for the costs of contracting and the imperfections of human knowledge. 

Step Three — Supply the Omitted Term. If a gap both exists and should be filled, the court asks what term the parties would have agreed to during their original negotiations had they foreseen the circumstances. The analysis recognizes that contract parties join in a cooperative enterprise to create a joint surplus and must remain faithful to the scope and purpose of their agreement. 

English Law and the Officious Bystander

In a notable move, the Court turned to English law for additional guidance. The opinion adopted principles from a leading Privy Council judgment holding that an implied term must be reasonable, necessary for business efficacy, so obvious that it goes without saying, capable of clear expression, and consistent with express contract terms. The Court endorsed the classic "officious bystander" test: if an observer had proposed the term during negotiations, the parties would have responded with a common "Of course!" 

Application: The Line Between Helping, Standing Neutral, and Consciously Harming

The Court drew a critical distinction between three categories of conduct: affirmatively helping a counterparty, standing neutral, and consciously harming. Although the vendor could not claim an implied obligation requiring the operator to use affirmative efforts to secure landlord consent — since other provisions of the agreement expressly imposed such obligations where the parties intended them — the vendor's claim was far narrower. The vendor sought only an implied term preventing the operator from deliberately undermining the landlord's willingness to consent. 

The Court held this was "center-of-the-fairway" for the implied covenant, which prevents a party from frustrating the fruits of the bargain that the asserting party reasonably expected. Applying the officious bystander test, the Court reasoned that if someone had suggested during negotiations that the parties needed to expressly prohibit the operator from secretly advocating that a landlord withhold consent, the parties would have responded with an immediate acknowledgment that such conduct was already prohibited. 

Alternative Pleading Survives

The Court also rejected the operator's argument that the vendor could not plead breach of the implied covenant and breach of an express contractual provision based on the same conduct. The Court reaffirmed that Delaware has permitted alternative pleading for nearly eight decades. 

Key Takeaways

• Contractual silence is not a safe harbor. When an agreement does not address a particular issue, the implied covenant can supply an omitted term — even where sophisticated parties could theoretically have anticipated the contingency.
• The three-part test is now clearly articulated. Courts will ask: (1) is there a gap? (2) should it be filled? and (3) what would the parties have agreed to? This framework provides a structured roadmap for both claimants and defendants.
• The "could not be anticipated" standard is not literal. The Court made clear that this formulation is a helpful reminder against judicial overreach, not a strict requirement. The real question is whether parties realistically could have addressed the issue given their circumstances and implicit understandings.
• Active sabotage is distinct from mere non-cooperation. There are obvious differences between helping, remaining neutral, and consciously harming. A party that deliberately undermines its counterparty's contractual rights is squarely within the implied covenant's reach.
• Draft contracts with an eye toward silence. Parties should carefully consider what their agreements do not say, particularly in complex multi-party or multi-venue arrangements where third-party approvals are required. Identifying and addressing potential gaps at the drafting stage remains the best defense against implied covenant claims.
• Alternative pleading is permitted. Plaintiffs may assert breach of the implied covenant alongside express breach of contract claims based on the same conduct without running afoul of pleading rules.