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The general principles of modern contract law, as embodied in Maine's Uniform Commercial Code, mandate that there is no duty of good faith toward a third-party claimant primarily because of the absence of a contractual relationship. The Maine court has implicitly recognized that contractual relationships are governed by a requirement of good faith performance. This duty to perform in good faith is not altered merely by calling the contractual relationship "adversary."
Plaintiffs Paul and Mary J. Reid established a line of credit and other loan facilities with Key Bank of Southern Maine, Inc. They brought a seventeen-count action in United States District Court for the District of Maine against Key Bank. They alleged various federal and state claims resulting from the actions of Depositors Trust Co. of Southern Maine (Depositors), Key Bank's predecessor in interest. The suit grew out of the circumstances surrounding the termination by Depositors of plaintiffs' credit arrangement with it. The Reids, who are black, claimed that Depositors acted in bad faith to limit and then terminate their credit. They also claimed that Depositors' actions were motivated by racial prejudice. Defendant claimed that Depositors acted in good faith to secure its financial interests when it learned of Reid's personal difficulties and mismanagement of his business; it denied that its actions were racially motivated. A jury trial resulted in a verdict for plaintiffs on one of the counts and an award of damages. Both parties have appealed.
Was defendant's interpretation of Linscott that an "adversary" relationship, whether contractual or not, would have no good faith requirement proper?
The court affirmed the judgment in all respects. The court held that an action lay for breach of implied covenant of good faith and fair dealing under the Uniform Commercial Code as adopted in Maine and found no demand feature in the loan documents that would vitiate the covenant because the documents were rife with conditions and terms inconsistent with ostensible demand language. The court found that a jury instruction regarding subjective standard of honesty-in-fact was properly given. The court ruled that the award of exemplary damages was properly stricken because, while Maine might recognize such an award for breach of covenant, the jury was not presented with any tortious act to which damages could attach. The court found insufficient evidence to create a confidential or fiduciary relation under Maine law.