The Delaware Limited Liability Company Act’s policy is to give the maximum effect to the principle of freedom of contract in LLC operating agreements. While the act permits parties to eliminate fiduciary duties that members or managers would otherwise owe to one another, an operating agreement may not eliminate the implied covenant of good faith and fair dealing that inheres in every LLC operating agreement under Delaware law. The implied covenant operates to imply terms to address developments or contractual gaps that neither party anticipated in the operating agreement, but which are necessary to fill gaps essential to meeting the reasonable expectations of the parties as reflected in the express terms of the operating agreement.

The implied covenant is not, however, a “free-floating requirement” that a party act in some morally commendable sense. Instead, “good faith” in the implied covenant means faithfulness to the scope, purpose, and terms of the parties’ operating agreement. Similarly, “fair dealing” does not imply equitable behavior, but rather, actions consonant with the terms of the operating agreement and its purpose. The Delaware Court of Chancery has emphasized that parties may not use the implied covenant to override express terms or rewrite an operating agreement because one party wants a better deal than it agreed to at the time of contracting. In sum, any implied term must be consistent with the reasonable expectations of the parties as reflected in the express terms of the operating agreement as a whole.