As a real estate broker and the owner of a brokerage in New Mexico, I think it's important to understand that contracts aren’t just about what’s written down—they also come with certain expectations. One of the most important is the covenant of good faith and fair dealing. This covenant is implied in every contract, and it basically means that both parties have to act in a way that supports the purpose of the agreement and doesn’t interfere with the other side’s ability to benefit from it.
It doesn’t create new duties, but it reinforces the idea that each party needs to follow through in a fair and reasonable way. For example, if a seller has agreed to allow a buyer to conduct inspections, the seller can’t just delay or block access to the property. On the other hand, if a buyer says they’ll apply for financing, they can’t go through the motions with a lender they know will deny them, just to get out of the contract. Both parties are expected to act honestly and do what they agreed to do in a timely and cooperative manner.
New Mexico recognizes this covenant under the Uniform Commercial Code and through long-standing case law. It applies even when it’s not written into the contract. That said, it won’t override the clear language of a contract—if something is explicitly stated and both parties agreed to it, that stands. But the covenant does act as a safeguard against someone trying to manipulate or block the deal in bad faith while technically staying within the lines.
This principle has been a part of contract law for decades. It came about because courts realized that focusing only on the black-and-white language sometimes led to unfair outcomes. Over time, the covenant of good faith and fair dealing became a widely accepted standard in contracts, including those used in real estate.
In my view, understanding this covenant helps everyone—buyers, sellers, and brokers—approach the transaction with the right expectations. A contract only works if both sides are working toward the same outcome, and this covenant helps hold that together.
This article is for informational purposes only and should not be considered legal advice. I’m not an attorney. If you’re dealing with a contract dispute or have legal questions, talk to a qualified attorney licensed in New Mexico.
