WEEK9: Implied Terms (Reasonable Efforts, Good Faith, & Warranties); Modification

Question 1

Implied Terms: Reasonable Efforts

Answer 1

Under California Law: reasonableness is based on the *abilities of the party, the *means available to it, and the *expectations of the other party.

In exclusivity contracts, reasonable or “best efforts” are implied.

Question 2

Implied Terms

Answer 2

A term that the court does not find in the parties’ agreement, even as broadly viewed, but that the court holds should be “implied by law” — made a part of that agreement by operation of the rules of law rather than by the agreement of the parties themselves.

Question 3

Implied Terms: Good Faith

Answer 3

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

Observing that a judge who uses the phrase good faith typically is most concerned with ruling out certain conduct, and less with formulating “the positive conduct of a standard,”

Fruits of Contract: In every contract there is an implied covenant 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, which means that in every contract there is an implied obligation of good faith and fair dealing.

Question 4

Implied Terms: Warranties

Answer 4

The warranty may be called an implied warranty of workmanlike construction, as in Speight, or by a variety of other names including warranty of habitability, skillful construction, or merchantability.

The McDonald court observed that “[c]learly every builder-vendor holds himself out, expressly or impliedly, as having the expertise necessary to construct a livable dwelling. It is equally as obvious that almost every buyer acts upon these representations and expects that the new house he is buying, whether already constructed or not yet built, will be suitable for use as a home. Otherwise, there would be no sale.”