Centronics sold business assets to Genicom. The purchase price was tied to the assets’ consolidated closing net book value, plus $4 million. Because the final value could not be known at closing, Genicom paid a preliminary amount, placed $5 million in escrow, and later added an $10.867 million adjustment amount after Centronics submitted a higher revised balance sheet.
Genicom’s accountants proposed downward adjustments of about $10.2 million. Centronics objected, and the valuation dispute went to binding arbitration. While arbitration was pending, Centronics asked Genicom to authorize release of $5.654 million from escrow—the amount Centronics characterized as undisputed. Genicom refused, maintaining that the agreements permitted no escrow distribution until the final purchase price was determined.
Centronics sued, alleging that Genicom breached implied contractual duties, including the covenant of good faith and fair dealing, by withholding the interim distribution. The Superior Court granted summary judgment to Genicom, reasoning that the contract required escrow payments only after final determination of the price and that the court could not add a partial-distribution mechanism the parties had not included. The Supreme Court of New Hampshire affirmed.
Issue #1
Whether Centronics could maintain a separate tort claim for breach of the implied covenant of good faith and fair dealing.
Holding
No. New Hampshire treats breach of the covenant in this setting as a contractual claim, not an independent tort.
Reasoning
Centronics’s second count labeled Genicom’s conduct a tortious breach of good faith. But New Hampshire law does not recognize an independent tort action merely because a party allegedly breached a contract. The court therefore accepted the trial court’s treatment of Centronics’s good-faith allegation as an asserted implied contractual term within its contract claim.
Issue #2
Whether New Hampshire or New York common law supplied a materially different rule governing the implied covenant of good faith.
Holding
No material conflict was shown, so the court assumed that any unproven New York law was identical to New Hampshire law.
Reasoning
The purchase agreement selected New York law, and Centronics cited New York-related authority. Neither side, however, demonstrated a relevant substantive difference between New York and New Hampshire law. The court accordingly applied its own common-law analysis while noting that the New York authorities Centronics invoked were consistent with that approach.
Issue #3
What function does the implied covenant of good faith and fair dealing serve in disputes over contractual performance?
Holding
It limits performance discretion only when the contract appears to give one party power to deprive the other of a substantial part of the agreement’s expected value.
Reasoning
The court explained that New Hampshire uses the language of good faith in several distinct settings, including contract formation, at-will employment, and contractual performance. This case concerned performance, where the covenant does not supply a free-ranging fairness review but addresses the particular danger created by broad contractual discretion.
reasoning cannot be repeated
Issue #4
Whether Genicom breached the implied covenant by refusing to authorize an interim release of escrow funds during the valuation arbitration.
Holding
No. The contract did not give Genicom unilateral and open-ended discretion over payment timing, and its express terms contemplated that the escrow fund would remain intact until the final valuation process ended.
Reasoning
The court’s performance-good-faith cases impose reasonable limits when a party’s discretion could effectively destroy the other party’s expected consideration. In Griswold, Seaward, Lawton, and similar cases, one party could otherwise withhold meaningful performance, payment, or value without a defined contractual limit.
reasoning cannot be repeated
reasoning cannot be repeated