7: Good Faith

Question 1

Good Faith (UCC)

Answer 1

Honesty in fact and the observance of reasonable commercial standards of fair dealing; every K or duty within the UCC imposes an obligation of good faith in its performance and enforcement

Question 2

R205: Duty of Good Faith and Fair Dealing

Answer 2

Every K imposes a duty of good faith and fair dealing in its performance and enforcement; faithfulness to agreed common purpose + consistency w/ justified expectations of the other party; bad faith may be overt or merely inaction and fair dealing may require more than honesty (e.g. evasion of spirit of bargain, lack of diligence, willful rendering of imperfect performance, abuse of power); implicit understanding that neither party will intentionally do anything to prevent other party from carrying out his part of agreement

Question 3

UCC 2-306: Output, Requirements and Exclusive Dealings

Answer 3

Terms which measures quantity by output of seller (agrees to buy all of seller’s production) or requirements of buyer (agrees to supply all of buyer’s needs) must be made in good faith

Question 4

Market St. Associates v. Frey: Good Faith

Answer 4

Implied duty not to intentionally take advantage of the other party’s ignorance of terms; good faith requirements help prevent opportunistic and inefficient behavior

Question 5

Feld v. Levy: Bread Crumbs

Answer 5

Output contracts have an implied obligation of good faith production on the part of the seller; good faith is question of fact, so court must know bakery’s intention for shutting down the ovens