Implied Obligation of Good Faith

UCC 1-302: Variation by Agreement

(a) Except where otherwise provided in (b) and elsewhere in UCC, the UCC provisions may be varied by agreement. (b) Obligations of good faith, diligence, reasonableness, and care prescribed by UCC MAY NOT be disclaimed by agreement. Parties, by agreement, can determine standards by which those obligations are measured if the standards are not unreasonable. Whenever UCC requires action to be taken within reasonable time, a time that is not manifestly unreasonable may be fixed by agreement. (c) Presence in certain provisions of UCC of phrase "unless otherwise agreed," does not imply that effect of other provisions may not be varied by agreement under this section.

R2d §205: Duty of Good Faith and Fair Dealing

Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.

Morin Building Products v Baystone Construction Inc (US 7th Cir 1983)

Case about the ugly wall in the manufacturing plant. While contract gave GM power of final approval of wall, court held that since deal was utilitarian and not for primarily aesthetic purposes, reasonable person standard would apply. Rule: Reasonable person standard (objective) applies when K primarily for commercial quality, operative fitness, or mechanical utility. Good faith standard employed when K involves personal aesthetics or fancy.

Locke v Warner Bros, Inc (1997)

Eastwood's estranged ex-girlfriend gets K with WB; WB refuses to even consider any of her projects. Court holds there is a good faith standard to at least consider the projects -- violates good faith (subjective, honesty-fact) standard if WB doesn't openly consider them - which it promised to do in K. Promise came with implied obligation of good faith. While duty of good faith may not be implied in a way that contradicts what is stated in clear and express words, here WB did not create express right to refrain from working. Rule: Where K involves matter of subjective satisfaction, the person with the discretion to state satisfaction must do so honestly and in good faith. Good Faith: Every K has implied covenant that neither party will do anything which will have effect of destroying or injuring right of other party to receive fruits of K.

UCC 1-304: Obligation of Good Faith

Every K or duty within UCC imposes obligation of good faith in performance and enforcement.

UCC § 1-201(b)(20): Definition of "Good Faith"

Means honesty in fact ("subjective") and the observance of reasonable commercial standards of fair dealing ("objective").

CISG: Article 7

Regard is to be had to international character and need to promote uniformity in application of CISG and observance of good faith in international trade.