Wisconsin law implies the duty of good faith into every contract. Courts use good faith as a protection device to approximate terms not actually contained in the contract, but those that would be included expressly if at the time of making the contract the parties had had complete knowledge of the future and the costs of negotiating and adding provisions to the contract are zero. During the performance of a contract, this duty prohibits one party from taking deliberate advantage of an oversight by your contract partner concerning his rights under the contract.
Plaintiff partnership sought specific performance of a contract between it and a trust, which required the partnership to provide financing and sales opportunities regarding a lease arrangement. The district court found the partnership had breached its duty to use good faith when dealing with the trust, and held that the partnership was not entitled to specific performance. Plaintiffs, partnership and general partner, appealed from the decision by the United States District Court for the Eastern District of Wisconsin.
Did the district court err in finding that plaintiff took advantage of the trust's unilateral, inadvertent mistake of fact and thereby violated its duty of good faith in performance of the contract?
The court affirmed the judgment for the trust, finding that the partnership could have purchased property at a discounted price if the trust declined a request for financing. Thus, when the general partner intended to deceive the trust through a series of vague and ambiguous letters, and took advantage of the trust's unilateral, inadvertent mistake of fact regarding financing opportunities, the partnership violated its duty of good faith in performance of the contract. Specific performance was therefore not appropriate and the judgment for the trust was affirmed.