The New Definition of Good Faith in Revised Article 1
UCC Law Journal, Vol. 35, p. 47, 2002
12 Pages Posted: 15 Sep 2008 Last revised: 23 Jun 2009
Date Written: 2002
Abstract
Revised Article 1 of the Uniform Commercial Code (UCC) changes the definition of good faith from the narrow, "honesty in fact" standard, to the broader standard which includes both honesty in fact and reasonable commercial standards of fair dealing. The changed definition essentially means that the new standard for determining good faith under Article 1 is no longer only subjective, but rather requires decision-makers to use both a subjective and an objective standard, incorporating fairness. This article will consider the effect of this change on UCC provisions and on the application of the doctrine of good faith.
The change in the definition of good faith revised in Article 1 is bound to bring about some change in the way courts interpret the obligation of good faith. Since the broad standard has already been adopted in most UCC articles, however, the change will not in all likelihood be a major one. Nonetheless, assuming the states adopt revised Article 1 as drafted, these enactments of the broad definition of good faith should generally reaffirm and strengthen the view that under the UCC, a party's conduct should not be contrary to the reasonable expectations of the other party, and should be in accordance with commercial standards reasonably structured to result in fair dealing.
Keywords: good faith, Uniform commerical code, honesty in fact
JEL Classification: K22, K40
Suggested Citation: Suggested Citation
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