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What Is The Covenant Of Good Faith And Fair Dealing That Was Breached In The Contract Between Scarlett Johansson And Disney?

Actress Scarlett Johansson sued Walt Disney Co., the parent company of Marvel Studios, in July 2021 when according to her, they breached the contract made between them by releasing the MCUs stand-alone Black Widow movie simultaneously in theatres and on Disney+'s streaming service.

Ms Johansson was promised by Marvel Studios that her movie 'Black Widow' will be a theatrical release. The film's box office receipts fell shortly and Ms. Johansson even argues that this deprived her of her potential earnings as her earnings were tied to the box office revenues. She was promised a percentage of the collection the movie made in the theatres but that was cut short due to the OTT release of the movie. Disney countered by claiming that the dual release strategy has significantly enhanced {Johansson's} ability to earn additional compensation on top of the $20m she received.

Scarlett Johansson makes a second and a more interesting argument in her suit against Disney. She is claiming that Disney breached what's called the Covenant of Good Faith Dealing. In U.S. this legal concept arose in the mid-19th century because of the coeval legal interpretations of the contract language. American laws fully adopted liberal British contractual conceptions, symbolized by the legal doctrine of caveat emptor, it also used the idea of dealing in good faith early on. In contract law, there is a general presumption that all the parties to a contract will deal with each other in good faith and in a manner that is fair to all of them, this is called the Covenant of Good Faith and Fair Dealing. It is implied to protect the rights of the other parties to receive the benefits of the contract.

A law-suit based on this covenant may arise when one party to the contract, on basis of a technical issue tries to claim the benefit of the contract by refusing to perform their obligations and frustrating the understanding between the parties. When a contract is interpreted by a court, it is implied that all written contracts have a covenant of good faith dealing.

The Covenant of Good Faith Dealing generally says that you can't do things that uphold the letter of contract, while frustrating the intent of the contract. The actions of Disney to release the movie simultaneously in theatres and on Disney+ may not be an actual breach of the language of the contract, but you can see that it violates covenant of good faith and fair dealing and this is what Ms Johansson says happened with Disney. Scarlett Johansson only made extra money based on the theatrical release, and received no remuneration from her movie being released on Disney+. There was no value of the additional $60m earned by Disney to the actor and that frustrates the covenant.

Often the malleability of this covenant undermines its goals and certainty. Good-Faith has been identified as the conduct of the parties during the agreement. Furthermore, since this covenant embodies the true vibe of law and there is no set technical rule that can be violated, the actions of the parties to the contract are taken into consideration even when they are outside of the court. It is important to note that when the contract was signed, Disney's platform Disney+ was not even announced.

Relying on the past behaviour of Marvel Movies, they have almost two whole months in the theatres before they are released on other mediums such as DVD/Blu-Ray. According to Scarlett Johansson, she had her lawyers approach Disney for a renegotiation of her contract well before her movie's release on Disney+. According to her, Disney absolutely refused to change her contract.

In India, good faith is defined in the Indian Penal Code under section 52 as:
Nothing is said to be done or believed in 'good faith' which is done or believed without due care and attention. In the case of Muhammad Ishaq v. The Emperor (1914), in which it was held that any action taken by the defendant which is based on a belief of having a decree passed in his favour was illegal because he could have found out if he inquired with a little more care and attention.

The breach of this implied covenant gives rise to a tort action. The advantage of a tort liability is that the plaintiff gets broader compensatory damages and there is a further possibility of punitive damages. In addition to the contract law, good faith sometimes affects almost all private laws in areas such as family law, property law and laws governing inheritance and gifts.

An easy example to understand the breach of this covenant is:
A owns a shop that sells computers. A made a contract with B to sell all of its Banana Phones to B. A is the manufacturer of Banana phones and after finalising the contract, A changed the name of his phones to Apple phones and denied selling its phones to B saying that they only made a contract to sell Banana phones. Although the language of the contract is held up here, the bad faith of A breaches the covenant of fair dealing and thus B has a legal remedy available.

It is important for a party to a contract to understand the other obligations under a contract and not just the actual terms of the contract. Disney continues to violate the spirit of the contract further by shamelessly attacking her character and her entity as a businesswoman. The company included her salary and her additional earnings in their statement to the press in an attempt to weaponise the success she has achieved as an artist and a businesswoman.

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