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54 Marq. L. Rev. 1 (1971)
Good Faith under the Uniform Commercial Code - A New Look at an Old Problem

handle is hein.journals/marqlr54 and id is 9 raw text is: MARQUETTE LAW REVIEW Vol. 54 WINTER, 1971 No. 1 GOOD FAITH UNDER THE UNIFORM COMMERCIAL CODE-A NEW LOOK AT AN OLD PROBLEM RUSSELL A. EISENBERG* INTRODUCTION Every contract and duty included under the umbrella of the Uniform Commercial Code' imposes upon the parties thereto an obligation of good faith in its performance or enforcement.'2 This obligation of good faith is without question one of the key sections of the Code.3 Furthermore, this obligation of good faith is one of the few require- ments that cannot be varied by agreement between the parties, although the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.4 Because the definitions of good faith set forth in the Code are very broad, and because the guidelines are few, much confusion has resulted in determining what the term means in actual practice and how it should be applied. The hypotheses of this article are that: a) the requirement of good faith under the Code is, in effect, a firm, far-reaching directive to the *J.D. 1961, Marquette Law School; Partner, Howard, Peterman & Eisenberg, Milwaukee, Wisconsin. 1 Good faith is a requirement of many non-Code transactions, as well. Bankruptcy Courts, for example, have broad equity powers, and there are several important good faith provisions in the Bankruptcy Act. See L. Salter, The Bankruptcy Court and the Creative Imagination. 75 Com. L. J. 221 (1970), and Cont. Ill. Nat'l. Bk. v. Chicago R. I. & P. Ry. 294 U.S. 648 (1935), Local Loan Co. v. Hunt, 292 U.S. 234, 240 (1934), and 1 REMINGTON ON BANKRUPTCY §22, pages 44, 46. 2 Uniform Commercial Code (hereinafter cited as U.C.C.) § 1-203. Every contract or duty within this code imposes an obligation of good faith in its performance or enforcement. Through judicial interpretation, the obligation of good faith extends to the performance and enforcement of code transac- tions. 3 E. Allan Farnsworth, Good Faith Performance and Coinmercial Reasonable- ness Under the Uniform Commercial Code, 30 U. CHI. L. REv. 666 (1963), hereinafter cited as Farnsworth ,Good Faith.' 4 U.C.C. §1-102 (3). The effect of provisions of this code may be varied by agreement except as otherwise provided in this code and except that the obliga- tions of good faith, diligence, reasonableness and care prescribed by this code may not be disclaimed by agreement but the parties may by agreement deter- mine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable.

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