Sales and Leases - A Problem-based Approach, 2016a

(4) The requirement in § 2-511 that tender of payment is a condition to seller’s duty to deliver
the goods.
(5) The requirement in § 2-602 that a buyer seasonably notify the seller of rejection.
1.4. Good Faith. Section 1-304 states that the obligation of good faith applies throughout the
Code, and § 1-201(b)(20) defines it. Recall that § 1-302(b) states that this obligation cannot be
disclaimed by the parties.
1.4.1. Good faith is defined at § 1-201(b)(20) as “honesty in fact and the observance of
reasonable commercial standards of fair dealing.” The pre-2001 version of Article 1
applied the subjective standard of “honesty in fact” to all parties. However, for purposes
of Article 2, former § 2-103(1)(b) applied the additional objective requirement of
“observance of reasonable commercial standards of fair dealing” to merchants (the
definition of which is discussed in Chapter 2). Thus, it is very important in applying this
concept to ascertain what version of Article 1 has been adopted in the jurisdiction
involved. Before applying precedent, determine whether the case you are citing applies
the old standard or the new standard. For non-merchants, if there was not good faith
under the old standard, then there would not be good faith under the new standard; but if
there was good faith under the old standard, then there is not necessarily good faith under
the new standard.
Research Assignment 1-1. Which version of the definition of “good faith” applies in your
chosen jurisdiction?
Problem 1-5. Aunt Martha is not a merchant. She recently sold her car to her nephew, a law
student. The written purchase agreement provides that the purchase price of $10,000 shall be
paid in 36 monthly installments. However, there is a provision that gives Aunt Martha the option
to accelerate the payment date and declare the entire amount due “at will.” See § 1-309. When
Aunt Martha learned that her nephew failed his Sales and Leases Class in his second year of law
school, Aunt Martha declared the entire unpaid balance of the purchase price due. The nephew
had insufficient funds to pay her back in full. The nephew sued Aunt Martha for breach of the
duty of good faith.
(1) Under the old definition of good faith, what would the nephew have to prove? How could he
prove it?
(2) Under the new definition of good faith, what would the nephew have to prove? How could he
prove it?
1.5. Unconscionability. Section 2-302 addresses unconscionability in contracts for the sale of
goods. Although unconscionability is expressly found in the Code only in Article 2 and in Article
2A (Leases) at § 2A-108, as explained in the Williams case discussed below, it is a common law
concept and probably supplements all Code transactions under § 1-103(b). Curiously, California
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