Bevis v. Terrace View Partners, LP, 244 Cal. Rptr. 3d 797 (2019)

Citation: Bevis v. Terrace View Partners, LP, 244 Cal. Rptr. 3d 797 (2019)
Parent Document: Bevis v. Terrace View Partners, LP, 244 Cal. Rptr. 3d 797 (2019)
Jurisdiction: California (state)
Effective Date: 2019-02-28
Original Source: https://www.courtlistener.com/opinion/6240337/bevis-v-terrace-view-partners-lp/ ↗

Full Text

2,047 chars

At plaintiffs' request and over defendants' objection, the court gave Special Instruction No. 66, which stated: "A party with the unilateral discretion to set an open term in a contract must do so under the standard of good faith and fair dealing. This means that the party with the discretion to set a price term in a contract or make a decision affecting the rights of the other contracting party must do so in an objectively reasonable manner." This special instruction was derived from Automatic Vending Co. v. Wisdom (1960) 182 Cal.App.2d 354, 6 Cal.Rptr. 31 ( Automatic Vending ), in which the Court of Appeal concluded that a contract giving one party unilateral discretion to vary the amount of commissions the other party was required to pay under the contract was not unenforceable as illusory because the implied covenant of good faith and fair dealing limited the commissions to a reasonable amount. ( Id. at pp. 357-358, 6 Cal.Rptr. 31.) The Automatic Vending court stated *817that " 'the fact that one of the parties reserves the power of varying the price or other performance is not fatal if the exercise of this power is subject to prescribed or implied limitations, as that the variation must be in proportion to some objectively determined base or must be reasonable.' " ( Id. at p. 357, 6 Cal.Rptr. 31.) The court further stated that " '[w]here a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing. [Citations.]' ... Such being the applicable law, the power given to the Automatic Vending Company to change the commission rates upon written notice would impose a duty upon it to exercise that discretion in good faith and in accordance with fair dealings and fix the commissions in such amount as the object of the contract is reasonably worth. Therefore, it cannot be said that the contract in question is illusory, lacks mutuality of obligation, or is void." ( Id . at p. 358, 6 Cal.Rptr. 31.)

Other Sections in This Document (125)

Full Text