Business law

es to perform their contracts according to the express terms of their contract. There is no breach of contract unless the parties fail to meet these terms. However, the UCC adopts two broad principles that govern the performance of sales and lease contracts: good faith and reasonableness. UCC 1-203 states, Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement. Thus, both parties owe a duty of good faith to perform a sales or lease contract. Merchants are held to a higher standard of good faith than nonmerchants [UCC 2-103(1)(b)]. The words reasonable and reasonably are used throughout the UCC to establish the duties of performance by the parties to sales and lease contracts. In addition, the term commercial reasonableness is used to establish certain duties of merchants under the UCC. Note that the concepts of good faith and reasonable-ness extend to the spirit of a contract as well as the contract terms. The underlying theory is that the parties are more apt to perform properly if their conduct is to be judged against these principles.

ethics Questions Does the concept of good faith promote ethical behavior? Does the vagueness of such UCC terms as good faith, reasonableness, and commercial reasonable-ness serve a useful purpose when determining the legality of a partys actions?