The Delaware Court of Chancery recently ordered a buyer to provide information necessary for sellers to participate in a negotiated earnout process, while rejecting the buyer’s effort to impose unwritten limits on earnout credit. Winton v. The North Highland Co. LLC, C.A. No. 2026-0138-LWW (Del. Ch. Sept. 18, 2026). The decision illustrates how the implied covenant of good faith and fair dealing, though narrowly and carefully applied under Delaware law, can preserve a negotiated earnout procedure without expanding the parties’ substantive written bargain.

North Highland, the buyer, acquired technology consulting firm The Bridge for cash, rolled equity, and an earnout tied in part to profits from new buyer projects. The agreement required the seller representative to notify buyer of potential qualifying projects and the parties to agree on their classification before client proposals were submitted. But it didn’t specify how the representative would obtain the information to do so. After closing, the buyer withheld pricing data and provided curated reports that excluded projects it unilaterally deemed ineligible.

The Court held that the implied covenant of good faith and fair dealing required the buyer to furnish the information necessary to make the agreed process work. The buyer could not insist on compliance with a notification condition while withholding the means to satisfy it. Taking care to confine the remedy, however, the Court held that the seller representative was entitled solely to periodic reports and disclosures before proposal deadlines to ensure its ability to identify and thus benefit from eligible projects, but not unrestricted real-time access to the buyer’s systems. Specific performance was warranted because damages could not reliably compensate for the lost opportunity to participate in the project classification process.

The Court also rejected the buyer’s efforts to exclude projects based on factors outside the agreement, such as where the work was performed, whom it was for, or whether the seller company participated. The requirement that the parties mutually agree on whether a project qualified did not give the buyer a substantive veto; it required them to apply the contractual revenue-based test. Although the buyer retained discretion over which projects to pursue and how to operate the business, it could not deny earnout credit on extra-contractual grounds.

As we have previously written, precise drafting of earnout procedures can help avoid costly litigation. Parties should specify what information must be supplied and when, how disagreements will be resolved, and ensure that those implementing the agreement understand its terms. The implied covenant remains a narrow safeguard, not a substitute for negotiated protections. But buyers should expect Delaware courts to enforce the procedures they agreed to, continuing their tradition of faithfully interpreting contracts as written and only implying terms strictly necessary to give effect to the parties’ explicit contractual bargain.