Dispute

GM hired defendant’s firm to perform construction, and defendant firm hired plaintiff to supply ad erect aluminum walls. The contract specified the wall type and said the walls had to satisfy the agent of GM. The wall was rejected despite being virtually perfect, and defendant hired another company to replace them while witholding payment from plaintiff. Plaintiff sued for the balance and won; defendant appealed on jury instructions.

Rules of law

In contracts with satisfaction terms, satisfaction is judged on an objective, reasonable-businessperson standard when the service or goods is of a utilitarian use and a subjective, good-faith-vs-bad-faith basis when it is a matter of aesthetics.

Arguments

Defendant argued that the word “aesthetics” was included and so actual subjective satisfaction was required. The court argued that this was boilerplate and made null by adjacent language. It argued that plaintiff would not have entered into the contract expecting to be bound to the whimsy of a specific person and that the defendant would have known that such a requirement would only come at an additional premium. They also noted that if a subjective standard were to be upheld, they would need to determine the actual mental state of the GM agent to evaluate bad faith.

Conclusion

The court upheld the jury instructions and decision, saying the contract should be evaluated on an objective standard with respect to satisfaction.