Performing in Good Faith

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Mind Map by , created over 5 years ago

Graduate/law school Contracts Mind Map on Performing in Good Faith, created by ditzymuffin on 03/12/2014.

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Performing in Good Faith
1 Restatement 2-201(b)(20) “Good faith,” except as otherwise provided in Article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.
1.1 Dalton v. Education Testing Service- Implicit in all contracts is a covenant of good faith and fair dealing in the course of contract performance.

Annotations:

  • Plaintiff Brian Dalton, twice took the Scholastic Aptitude Test (SAT) administered by Defendant, Educational Testing Service. Due to a large score increase on the second test over the first test, Defendant reviewed the tests, determined two different people took the exams, and offered Plaintiff options to remedy the situation. After Plaintiff submitted substantial evidence of his innocence, Defendant continued to question the score, and Plaintiff’s father commenced this action to prevent Defendant from canceling Plaintiff’s score.
1.1.1 implied obligation to act in good faith requires that “neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.

Annotations:

  • Case specific: When a contract states that one shall exercise discretion, this includes a promise not to act arbitrarily or irrationally. Here, Defendant was under no obligation to initiate an external investigation. However, the contract required Defendant to consider any relevant evidence supplied by Plaintiff. By refusing to consider the relevant information furnished by Plaintiff, Defendant failed to comply in good faith with its own test security procedures, thereby breaching its contract with Plaintiff.  
1.2 Good faith is an excluder. A lawyer can more accurately determine a judge’s understanding of good faith. Ask what in the situation or hypo does the judge intend to rule out by his use of the phrase (pg 555)
1.3 Good faith is not independent. It’s always attached to contract terms. Have they acting in GF in regards to K.
1.4 De La Concha of Hartford, inc v. Aetna Life Insurance Company (2004)-No bad faith, no CUTPA violation

Annotations:

  • The lessee (tobacco shop) entered into a 15-year lease with the lessor's predecessor for retail space at the mall. The lease was renewed twice and it subsequently expired by its terms. The lessee maintained that the lessor's rejection of the option to renew was unreasonable and in violation of the lease's implied covenant of good faith and fair dealing because the lessee's failure to reach certain gross sales was due in large part to the lessor's failure to promote the mall as required under the lease. 
  • The appellate court held that although the lessor had pursued its own self-interest in limiting its losses in the operation of the mall, it did not do so because of a dishonest purpose, a furtive design, or ill will toward the lessee, but rather, for the purpose of extricating itself from a well-intended but unsuccessful business venture that resulted in the lessor's loss of more than $ 50 million over the course of approximately 20 years. The lessor went to considerable lengths to retain existing tenants and to attract new ones by offering certain tenants substantial rent reductions to induce them to renew their leases. In addition, since there was no bad faith, there was no CUTPA violation.  
1.4.1 To constitute a breach of good faith/fair dealing o Defendant’s acts impede plaintiff’s right to get reasonably expected benefits under the K. Acts must be in bad faith
1.4.2 o Bad faith implies actual or constructive fraud or a design to mislead or deceive another or neglect or refusal to fulfill some duty or contractual obligation, not prompted by an honest mistake as to ones rights and duties but by some interested or sinister motive. Pg 560 (de la concha)
1.5 Market street Assoiates v. Frey (1991) pg 564-o There is a duty of good faith implied in every contract, which states that there is an implied undertaking by the parties not to take advantage in way that could not have been contemplated at the time of drafting the contract and which was not resolved by the parties.

Annotations:

  • Facts:  Market Street Associates Limited Partnership (Plaintiff), lessee, brought an action against Dale Frey (Defendant), lessor, alleging breach of lease using a clause buried in paragraph 34 
1.6 Bloor v. Falstaff Brewing Corp (1979) - o A “best efforts” clause imposes an obligation to act with good faith in light of one’s own capabilities. pg 567

Annotations:

  • Brief Fact Summary. Plaintiff James Bloor is the Reorganization Trustee of Balco Properties Corporation, and Defendant Falstaff Brewing Corp., is a company that purchased the Ballantine brand of beer from Plaintiff. According to the agreement, Defendant was to use its best efforts to maintain a high volume of sales of Ballantine Beer. Plaintiff initiated this action, averring that this clause of the contract was violated.
1.6.1 There's a specific best effort clause here (the original owner was supposed to het fifty cents per barrel) 1) best efforts + 2) high volume
2 UCC § 1-304. Obligation of Good Faith.-Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement