Also known as: fair dealing · fair-dealing · fair dealing doctrine
Written by attorneys · grounded in primary & secondary sources — see below
A contractual obligation requiring parties to act honestly and observe reasonable commercial standards in the performance and enforcement of agreements. The obligation prevents one party from undermining the agreed allocation of risks and benefits even when literal contract language might permit the conduct.
Forrest Falconer contracted with Frontier Capital to build a warehouse using a specific grade of steel. Falconer misread the specifications but the error did not amount to bad faith. When the parties discovered the mismatch, Falconer sought reformation of the writing. The court allowed reformation because Falconer's oversight did not violate reasonable standards of fair dealing.
Fabian Flynn and Floyd Franklin formed a general partnership to operate a foundry. Their agreement set a specific reporting schedule for capital calls that differed from the default statutory rule. The partners later disputed whether the schedule satisfied the obligation of good faith and fair dealing. The court enforced the agreed standard because it was not manifestly unreasonable.
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Fiona Foster and Fernando Farrell formed a limited partnership to develop commercial property. The agreement imposed reasonable limits on the timing of information requests. When Foster demanded immediate access to all records, Farrell refused. The court upheld the contractual timing rules because they measured performance of the good faith obligation without being manifestly unreasonable.
Felicia Fuentes purchased a promissory note from Frostline Textiles. Fuentes knew the maker had a minor dispute with the original payee but had no actual knowledge of fraud. When Fuentes demanded payment, the maker claimed bad faith. The court enforced the note because Fuentes satisfied honesty in fact and reasonable commercial standards of fair dealing.
Franklin Foundry contracted to sell equipment to Falcon Dynamics. The seller's agent overstated the equipment's capacity but the buyer had no reason to doubt the statement. When the equipment underperformed, Falcon Dynamics sought rescission. The court found reliance justified because the buyer's conduct met reasonable standards of fair dealing.
Frostline Textiles and Frontier Capital formed a partnership to manufacture textiles. One partner exercised a contractual right to inspect books on short notice. The other partner objected that the timing was inconvenient. The court held the inspection proper because the partner discharged the right consistently with the obligation of good faith and fair dealing.
No. A mistaken party's fault does not bar avoidance or reformation unless the fault amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
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No. The obligation cannot be eliminated, although the agreement may prescribe standards for measuring performance if those standards are not manifestly unreasonable.
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Good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing.
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No. The recipient's fault does not make reliance unjustified unless it amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.
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Yes. Every partner must discharge duties and obligations under the act or the partnership agreement and exercise rights consistently with the contractual obligation of good faith and fair dealing.
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…guardian and ward (Milner v. Harewood, 18 Ves. 259, 274). At other times some inquiry is allowed as to the facts involved. Fair dealing and a scrupulous regard for honesty is required. But nothing more. It may be stated generally that a partner may not for his own benefit secretly take a renewal of a firm lease to himself.…