"[T]he reasonable person standard is employed when the contract involves commercial quality, operative fitness, or mechanical utility which other knowledgeable persons can judge. . . . The standard of good faith is employed when the contract involves personal aesthetics or fancy."
Morin Building Products Co. v. Baystone Construction, Inc.
General Motors hired defendant to build an addition to one of their plants. Defendant hired plaintiff to build the walls for the addition. The walls were to match the existing metal siding and to be subject to the architect or owner's agents' approval, which would be final if within the terms. It said that any dispute about the quality or fitness of the work was strictly GM's decision and that custom was irrelevant.
Plaintiff put up the walls, but they did not look uniform if viewed in the sunlight at an acute angle. GM's representative therefore rejected it. Defendant removed plaintiff's siding and hired another subcontractor to replace it. Defendant therefore refused to pay plaintiff the $23,000 balance of their contract, so plaintiff sued.
Jury found for plaintiff.
What is the standard for the satisfaction of a third-party?
There was much evidence that GM's rejection was unreasonable, so using an objective test like the trial court did, the jury would be correct. Using a subjective test, then there would need to be a new trial to determine whether GM's representative actually was dissatisfied.
Most jurisdictions, the Restatement, and previous Indiana cases have taken an objective approach. While some call this paternalistic, this is not to protect the weaker party, but to approximate what the parties actually intended instead of an unforeseen outcome.
The building was a factory and therefore not intended to be a thing of beauty. Function and cost is more important than aesthetics. What was ordered of plaintiff usually is not uniform, so GM and defendant should have ordered something different if that was actually important. Because the GM and defendant ordered something that is not usually pretty, it does not matter what they subjectively wanted, and the satisfaction should be judged objectively.
While the form contract specifies that it must comport with GM's "artistic effect", it only says so if it is within the terms of the contract. It is not clear that GM and defendant were looking for a certain "artistic effect" here so the clause does not apply. Another section says that all work and materials must be "first class in every respect," but it is not clear that plaintiff's were not.
See:R2C § 228
Because the parties probably did not intend to make a contract qualified on the resulting "artistic effect," the objective reasonable person standard should be used. Affirmed.