Company X and Supplier Y enter into a contract for the supply of raw materials, with delivery deadlines specified. As the deadlines approach, Supplier Y delays shipments without notifying Company X, knowing that these delays will cause Company X to miss its production targets. Which action best demonstrates a breach of the obligations of good faith and fair dealing by Supplier Y?
Supplier Y offers a discount on future orders to compensate for the delays.
Supplier Y seeks a mutual agreement to extend the delivery deadlines due to unforeseen circumstances.
Supplier Y maintains regular communication but experiences legitimate delays in production.
Supplier Y delays shipments without notifying Company X, causing production delays.
Supplier Y intentionally delaying shipments to cause Company X to miss production targets undermines the contractual relationship and the benefits Company X expected from the contract. This behavior violates the implied covenant of good faith and fair dealing by acting dishonestly to interfere with the contract's purpose.
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What does 'good faith and fair dealing' mean in contract law?
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What are the potential consequences for Supplier Y's breach of good faith?
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