Also known as: fair-dealing
Written by attorneys · grounded in primary & secondary sources — see below
A contractual standard requiring parties to act honestly and to observe reasonable commercial standards when performing and enforcing agreements. The standard prevents one party from undermining the other's legitimate expectations through concealment, misrepresentation, or opportunistic conduct.
Fatima Flores contracted with Frontier Capital to supply custom fixtures for a new office building. After signing, Frontier discovered it had misread the specifications and installed the wrong grade of material. Frontier sought to reform the contract, and the court allowed reformation because Frontier's oversight did not rise to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
Fernando Farrell and Faye Fuller formed a general partnership to operate a textile mill. Their agreement attempted to eliminate the obligation of good faith and fair dealing but instead prescribed specific disclosure timelines for capital calls. The court enforced the prescribed standards because they were not manifestly unreasonable.
Select any source to read its text and confirm it supports the definition.
Flora Ford and Franklin Foundry created a limited partnership to develop waterfront property. The agreement eliminated the contractual obligation of good faith and fair dealing for the general partner but substituted measurable benchmarks for capital distributions. The court upheld the benchmarks because they were not manifestly unreasonable.
Francesca Fiore purchased a promissory note from Fidelity Trust. When the maker claimed the note was obtained through fraud, the court examined whether Fidelity had observed reasonable commercial standards of fair dealing in acquiring the instrument.
Francesca Fowler entered a contract with Frostline Textiles after the seller made an assertion about fabric durability. The court held that Fowler's failure to verify the assertion did not render her reliance unjustified because it did not amount to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
Fernando Farrell, a partner in Frontier Capital, exercised a right under the partnership agreement to inspect books. The court required that he exercise the right consistently with the contractual obligation of good faith and fair dealing rather than to harass the managing partner.
Yes. The standard requires parties to act honestly and to observe reasonable commercial standards, which includes disclosing facts that would reasonably affect the other party's judgment when the conduct is connected to performance of the agreement.
Supporting sources
No. A partnership agreement may prescribe standards by which performance is measured if those standards are not manifestly unreasonable, but it cannot eliminate the obligation itself.
Supporting sources
A party's failure to act in good faith and in accordance with reasonable standards of fair dealing weighs strongly toward a finding that the breach is material and may justify the other party in suspending performance.
Supporting sources
No. Acceptance of an improper delivery does not prejudice the aggrieved party's right to demand adequate assurance or to insist on good faith and fair dealing in subsequent performance.
Supporting sources
…the reason a contracting party offering services of a public or quasi-public nature has been held to the requirements of fair dealing, and, when it attempts to limit its liability, of securing the understanding consent of the patron or consumer, is because members of the public generally have no other means of fulfilling…