Model Closing Opinion Letter (Annotated) - American Bar Association

2 Model Closing Opinion Letter (Annotated)
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court. The equitable principles limitation relates to those principles
courts apply when, in light of facts or events that occur after
the effectiveness of an agreement, they decline in the interest
of equity to give effect to particular provisions in the agreement.
The intent of the equitable principles limitation is thus to point out
the uncertainty of application of literal contract language when courts
intervene to infuse notions of justice and fairness into a contract.
Examples of the application of the equitable principles limitation
include defenses that result from the immateriality of the breach or
the enforcing party’s lack of good faith and fair dealing, unreasonableness
of conduct, or undue delay or laches. Similarly, a court of
equity may not allow a plaintiff’s overreaching pursuit of disproportionate
relief. Other defenses rooted in equity and excluded from
the remedies opinion by the equitable principles limitation
(whether in a proceeding in equity or at law) include waiver, estoppel,
unclean hands, misrepresentation, duress, and defenses based
on a breach of fiduciary duty, mutual mistake, and materiality of
the client’s breach and the consequences of the breach to the injured
party.
The equitable principles limitation also covers the effect of judicially
developed rules concerning the manner and continuing effect
of waivers and modifications, notwithstanding a provision in a
contract requiring written waivers or modifications. Examples include
rules of law that (i) enforce an oral waiver or modification
where a material change of position in reliance on the waiver or
modification has occurred, and (ii) provide that a course of performance
may operate as a waiver.
The Legal Opinion Committee believes that the implied covenant of
good faith and fair dealing, while a “legal” concept, is within the
coverage of the equitable principles limitation. Therefore, the
words “including (without limitation) concepts of materiality, reasonableness,
good faith and fair dealing,” while permissible, are
not necessary.
The equitable principles limitation is applicable to Opinions that
raise equitable concerns and to no others, whether stated within the
Remedies Opinion or as a general exception to all the Opinions. See
TriBar Report § 1.2(c).