Engagement / Study Questions: CONTRACTS

ESQ #35
Good Faith – part 2

1. There are two main issues in Dalton v. Educational Testing Service – one pertains to
the basis of recovery (breach of contract) and the other to the measure of
recovery (what remedy is available).
● What precisely is the alleged breach of contract by ETS?

Did ETS breach their contract with Dalton by refusing to release his SAT scores?

● What remedy does Dalton seek for the alleged breach?

Dalton wants specific performance, he wants his scores.

2. Turning first to the alleged breach of contract by ETS – the violation of good faith
and fair dealing implicit in ETS’s contract with Dalton. What is the rule the court
uses to decide whether this implicit contractual duty has been violated? In other
words, how does the court define “good faith?”

they say “any promises which a reasonable person in the position of the promisee
would be justified in understanding were included”

3. Does the court decide what ETS must determine with respect to Dalton’s test
scores, or does the court simply identify how ETS must make that determination?
Explain precisely what it is that the court requires ETS to do.

They say that they don’t have to prove that Dalton cheated, but they do need to take
any relevant info dalton can offer and consider it when reviewing the scores

4. The dissenting judge (J. Levine) in Dalton v. ETS states that he and the majority
all agree that ETS “had no duty, express or implied, to investigate the
information submitted by Brian Dalton.” Is that a true characterization of what
the majority opinion concludes?

Um no? The majority says towards the end of 738 that ETS owed Dalton good faith
consideration of the materials he submitted.

5. Why does J. Levine conclude that ETS met its contractual obligations to Dalton?

He says that while ETS was required to consider the materials Dalton submitted, at the
end of the say they reserved the right to cancel the scores if they wanted

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6. Which opinion do you believe offers a better legal analysis of the situation in
Dalton v. ETS, the majority or dissent – and why?

I prefer the majority, but the bit at the very end of the dissent makes me like it a bit
more honestly, since he explains that even with all of the materials, the main issue the
ETS had wasn’t solved, that being the handwriting. That makes it seem more like the
ETS did review his materials in good faith but they just didn't do enough.

7. The issue in Third Story Music, Inc. v. Waits is “when an agreement expressly
gives to one party absolute discretion over whether or not to perform, when
should the implied covenant of good faith and fair dealing be applied to limit its
discretion.” What rule does the court use to decide this issue?

They use the stuff from the Carma case

8. What was the express term of the agreement in Third Story Music that the court
found explicitly authorized the alleged act(s) of bad faith?

would it be the “at its election” bit?

9. How does the implied duty of good faith operate differently in Third Story Music
and in Wood v. Lucy, Lady Duff-Gordon? Why does “good faith” constrain absolute
discretion in the Wood case, but does not constrain discretion in Third Story
Music?

The court says in TSM the illusory bit was not the only consideration involved, since
there was also a minimum payment from Warner involved.

10. Cussler v. Crusader Entertainment, LLC also deals with contractual clauses defining
the level of a party’s discretion.
● What level of discretion did Cussler have with respect to accepting
changes to the screenplay

He was the final approval for any changes Crusader made, but the director would
retain his ability to change stuff on set like usual.

● What level of discretion did Crusader have with respect to approving

Cussler’s public statements?

They called it an “implied covenant?”

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11. Does the court in Cussler use the same rule as the court in Third Story Music to
resolve the issue of how the implied duty of good faith interacts with express
contractual allocations of discretionary power?

it seems so, since they reference both Carma AND the TSM case

12. Why did the court find that it was not bad faith for Cussler to fail to even
consider proposed screenplays?

They said that there was still consideration, since Crusader could have still produced a
film based on an approved script, but chose not to.

13. Why did the court find that it was not bad faith for Cussler to make disparaging
statements to the press about Crusader and Sahara, the movie?

They say that the stuff with Cussler's statements is in the express contract? so would it
not rely on good or bad faith since they lay out what they want and don’t need to imply
anything?

14. Why does the court on remand need to make a finding as to which party is
“prevailing” since the appellate court has already foreclosed anyone paying
damages due to a violation of good faith and fair dealing?

I guess so there is something for the trial court to go off of when they get the case back

15. Based on the rule in both of these cases, when (if ever) would the implied
covenant of good faith and fair dealing constrain party discretion and
performance in and under a contract?

I’m not totally sure it would