Sales and Leases | 46
equipment, furnishing several parts in so doing. If the transaction is classified as one for the sale of goods under the predominant-purpose test, then the mechanic is a seller. If the transaction is primarily one for services under the predominant-purpose test, then the mechanic is not a seller, because Article 2 does not apply. Applying the gravamen test, if the developer sues the mechanic as to the parts she provided in effectuating the repairs, then she will be treated as a seller concerning those parts. [ See 2 Anderson U.C.C. § 2- 103:45 (3d. ed.), Westlaw (database updated Dec. 2020).] d. Financiers and Sellers Ordinarily, one who merely finances a sale is not a seller. But a financier may become a seller if she somehow transfers title to goods, for instance, by repossessing and then reselling the goods pursuant to a security interest in them. [2 Anderson U.C.C. § 2-103:39 (3d. ed.), Westlaw (database updated Dec. 2020).] 3. Good Faith As to a merchant, good faith means “honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.” [U.C.C. § 2-103(1)(b) (1951).] That is, as to a merchant, good faith requires subjective honesty and objective fairness. As to a nonmerchant, good faith means simply honesty in fact—except that some jurisdictions also require even a nonmerchant to observe reasonable commercial standards of fair dealing. [2 Anderson U.C.C. § 2-103:46 (3d. ed.), Westlaw (database updated Dec. 2020).] a. The General Obligation of Good Faith In general, good faith requires honoring the spirit of the contract, not just the letter. In that sense, good faith is a check on opportunistic, exploitative, or arbitrary behavior, even if consistent with the contract’s express language. Good faith thus demands that the parties perform their obligations faithfully, according to an agreed mutual purpose, and consistently with each other’s justified expectations. A party acts in bad faith, then, if she exploits evolving economic reality to secure a gain that exceeds what she reasonably expected upon entering the contract. [ See Allapattah Svc’s, Inc. v. Exxon Corp. , 61 F.Supp.2d 1308 (S.D. Fla. 1999).] b. Reasonable Commercial Standards of Fair Dealing The objective prong of good faith requires observing reasonable commercial standards of fair dealing in the trade. The term commercial reasonableness lacks a precise definition, leaving courts to consider all the relevant facts to determine whether a party satisfied this standard in a given case. In this vein, customary usages and standard commercial practice in the relevant industry are often virtually dispositive. If a party’s conduct is too far out of
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