Performing Contracts in Good Faith

Question 1

Define: Good faith

Answer 1

honesty in fact and the observance of reasonable commercial standards of fair dealings.

Question 2

Is good faith required in a contract?

Answer 2

Yes, all contracts implicitly require a duty to negotiate and perform the contract in good faith.

Question 3

What is the good faith test?

Answer 3

Between Merchants - honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
The relevant commercial standards are “course of performance,” “Course of dealings,” and “usage of trade.”

Question 4

UCC 1-302(a) Define: Course of performance

Answer 4

A sequence of conduct between the parties to a particular transaction that exists if:

(a) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and
(b) the other party with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

Question 5

UCC 1-302(b) Define: Course of dealings

Answer 5

a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understand for interpreting their expressions and other conduct.

Question 6

UCC 1-302(c) Define: Usage of trade

Answer 6

is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved by facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.

Question 7

Can a party bring an action for failure to act with good faith?

Answer 7

No, the party must bring a claim for something else and then tack on a claim of failure to act in good faith.