Also known as:manifest unreasonableness · Wednesbury unreasonableness
Written by attorneys · grounded in primary & secondary sources — see below
A contractual standard or term so plainly unreasonable given the purposes and circumstances of the agreement that it effectively nullifies a mandatory obligation such as good faith and fair dealing. Courts decide the question as a matter of law by examining the term at the time it was adopted and asking whether its objective or chosen means is unreasonable in light of the enterprise's activities.
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How it applies
Common Examples
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Urgency Clause Allows Self-Preferring
Mustafa Mahmoud and Malcolm McKinley formed a limited partnership to run a shared litigation support center. Their agreement stated that any partner's declaration of urgency would satisfy good faith and fair dealing when allocating staff. Mustafa repeatedly claimed urgency and reassigned the best researchers to his matters, leaving Malcolm with junior staff and missed deadlines. The court held the subjective standard manifestly unreasonable because it supplied no objective limit or review and permitted systematic self-dealing.
Colorable Rationale Nullifies Review
Momentum Capital served as general partner of a limited partnership owning clothing stores. The agreement provided that any decision was conclusively in good faith if supported by any colorable marketing rationale. Momentum diverted advertising funds from stores co-owned by limited partner Miles Montgomery to outlets secretly owned by its own family. The court refused to enforce the clause, finding it manifestly unreasonable because it effectively eliminated the good-faith obligation.
Impracticability Standard Too Lax
Melissa Mills and Mercury Industries formed a limited partnership to operate a distribution business. Their agreement deemed any performance commercially reasonable if Mercury could articulate a colorable business reason for delay. When Mercury used a far more expensive substitute without notice, Melissa sued. The court treated the broad clause as manifestly unreasonable and applied the statutory good-faith obligation instead.
Market-Share Allocation Deemed Unreasonable
Marcus Mitchell and several partners formed a limited partnership to market generic pharmaceuticals. The agreement provided that any allocation of liability based on market share would be deemed fair if supported by any plausible sales data. Marcus sued after injury from an unidentifiable product. The court rejected the clause as manifestly unreasonable because it allowed partners to escape meaningful accountability.
Forum Clause Bars All Claims
Miguel Mendoza and a corporate partner formed a limited partnership to operate cruise-related services. The agreement contained a clause that any dispute must be litigated in a distant forum and that the clause would be conclusively reasonable regardless of cost. After suffering injury, Miguel sued locally. The court refused to enforce the provision, holding it manifestly unreasonable because it effectively eliminated any practical remedy.
Design Exemption Without Alternative
Maxwell Manufacturing and a partner formed a limited partnership to produce recreational equipment. Its agreement stated that any design would be deemed nondefective if the company could cite any industry practice, even without a safer alternative. A user rendered quadriplegic sued. The court found the standard manifestly unreasonable and permitted the claim to proceed under the statutory good-faith duty.
Common questions
Frequently Asked
4
When does a partnership agreement's standard for measuring good faith become unenforceable?+
A standard is unenforceable when it is manifestly unreasonable because it supplies no objective limit, review procedure, or cap and thereby permits systematic self-dealing. Courts decide the question as a matter of law by examining the term at formation and asking whether its objective or chosen means is unreasonable given the partnership's purposes and activities. The underlying duty of good faith and fair dealing itself cannot be eliminated.
Who decides whether a contractual standard is manifestly unreasonable?
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The court decides the issue as a matter of law under the Uniform Limited Partnership Act. The inquiry focuses on circumstances existing when the term was adopted and asks whether the term's objective or its means is plainly unreasonable in light of the partnership's purposes, activities, and affairs.
Supporting sources
Can parties agree that any decision supported by a colorable rationale satisfies good faith?+
No. Such a clause is unenforceable when it is so forgiving that it effectively nullifies the mandatory duty of good faith and fair dealing. The statute permits parties to prescribe measuring standards only if those standards remain reasonable and do not eliminate the underlying obligation.
Supporting sources
Does a procedural mechanism such as two signatures on a brief explanation automatically satisfy good faith?+
No. A purely procedural standard is manifestly unreasonable when the decision-makers have undisclosed conflicts and no disclosure or independent review is required. The absence of safeguards against bias renders the mechanism an unreasonable means of measuring the good-faith obligation.
Supporting sources
if applied to a decentralized industry composed of countless small producers. (7) Plaintiff attempts to state a cause of action under the rationale of Hall . She alleges joint enterprise…
Business Associations Agency and PartnershipSpecial rules concerning limited partnerships · Disclosure requirementsUBEFoundational