The 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.
A motor company hired defendant contractor to build an addition to its plant. Defendant hired plaintiff subcontractor to erect the aluminum walls for the project. The construction contract provided that all work would be done subject to the final approval of the motor company's authorized agent, and that his decision in matters relating to artistic effect would be final. Plaintiff put up the walls. Because the walls did not have a uniform finish the motor company rejected the work. Defendant refused to pay plaintiff for the work. Plaintiff brought an action for breach of contract against defendant. The district court ordered that plaintiff should be paid for its work. On appeal, defendant alleged that the district court erred when it gave a jury instruction that defined the standard for acceptance of the work by defendant under the reasonable person standard.
Was the contractor dissatisfied with the materials and workmanship in question, and was the rejection therefore in bad faith?
The court affirmed the decision which granted a judgment in favor of plaintiff subcontractor in a breach of contract action because defendant contractor and plaintiff did not intend to subject approval of plaintiff's work to the aesthetic whim of the motor company. The court ruled that the proper standard for approval of plaintiff's work was the reasonable person standard.