Also known as: obligationes ex contractu · contractual obligation · obligation arising from contract
Written by attorneys · grounded in primary & secondary sources — see below
An enforceable duty created by agreement between parties that requires performance consistent with good faith and fair dealing.
Outback Mining and its two partners signed a partnership agreement that attempted to remove any duty of good faith when one partner sought to sell partnership assets to a competitor. The remaining partners objected and invoked the obligation arising from their original agreement. A court held that the agreement could set measurable standards for performance but could not wholly eliminate the underlying contractual duty.
Osprey Aviation formed a limited partnership with Oakridge Manufacturing as the general partner. The limited partnership agreement set specific benchmarks for disclosure of financial information instead of leaving the duty of good faith undefined. When a limited partner later claimed nondisclosure breached the duty, the court applied the agreement's prescribed standards to decide whether the obligation had been met.
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Octavia Okonkwo and Omar Olson formed a general partnership to operate a delivery service. When Olson sought to withdraw capital for a personal venture, Okonkwo demanded that the withdrawal occur only after full disclosure and fair valuation. The partnership agreement and governing statute required Olson to exercise withdrawal rights consistently with the contractual obligation of good faith.
Oasis Resorts admitted Ophelia O'Brien as a limited partner. O'Brien later negotiated a separate supply contract with the partnership and failed to reveal a conflicting interest she held in the supplier. The limited partnership agreement and statute required O'Brien to perform that transaction consistently with the contractual obligation of good faith and fair dealing.
Otto Osman served as general partner of a limited partnership that owned commercial property. When Osman proposed leasing space to a company he partially owned, the other partners demanded full disclosure of terms. The statute required Osman to discharge that leasing decision consistently with the contractual obligation of good faith and fair dealing.
Allied Structural Steel maintained pension obligations to employees under existing contracts. A new state statute attempted to impose additional funding requirements that altered those contractual duties. The company challenged the statute on the ground that it impaired the preexisting contractual obligation without consent of the parties.
A partnership agreement may prescribe reasonable standards for measuring performance of the obligation but may not eliminate the obligation itself. The uniform acts expressly prohibit complete elimination while permitting limited, non-manifestly unreasonable adjustments to the standard.
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Yes. The uniform acts impose the obligation on general partners under the partnership agreement and on limited partners when they exercise rights or discharge duties under the agreement. Both must act consistently with good faith and fair dealing.
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A partner does not automatically violate the contractual obligation of good faith and fair dealing merely by furthering personal interest. The obligation is breached only when the conduct fails to meet the required standard of good faith in discharging duties or exercising rights.
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…setting in which they arise. [^maj-26]: We do not pass upon the question whether, in the absence of an express or implied contractual obligation, a party to a nonmarital relationship is entitled to support payments from the other party after the relationship terminates. [^maj-27]: We wish to commend the parties and amici for the…