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United States Court of Appeals for the Seventh Circuit - 941 F.2d 588
Tags: Contracts, good faith
tl;dr:
One party benefits from other party's oversight in negotiations. It is a question for trial whether the beneficiary intentionally tricked the other party in violation of good faith duty.Video Summary
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The legal case involves a contract dispute between J.C. Penney Company and General Electric Pension Trust over a sale and leaseback arrangement. The court confirms diversity of citizenship between the parties and reminds lawyers and judges to carefully monitor federal jurisdiction, especially in diversity cases involving unconventional entities such as partnerships and trusts. The judge granted summary judgment for the pension trust on the grounds that Market Street Associates failed to mention paragraph 34 of the lease in their correspondence with the pension trust, which prevented negotiations over financing, a condition precedent to the lessee's exercise of the purchase option. The judge also found that this failure violated the duty of good faith, which is read into every contract in Wisconsin. The duty of good faith prohibits opportunistic behavior that a mutually dependent, cooperative relationship might facilitate without any governing rules. The concept of "good faith" in contracts could be replaced with the idea of implied conditions that are necessary due to the unpredictability of the future at the time the contract was made. The district judge agreed with the pension trust's argument that Market Street Associates has a possible remedy, and therefore, the pension trust's position is untenable.
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