“The Wig Master” – Obligation of Good Faith

When Jerry attempts to return a a jacket for “spite,” the store declines to issue a refund. Is it true that Jerry can’t return an item based purely on spite. Can Jerry change the reason for why he is attempting to return an item?

All parties involved in a contract which is governed by the Uniform Commercial Code (UCC) must act in good faith. The UCC is the guiding document for all contracts of commercial business transactions, like sales between retail stores and consumers. The UCC imposes an obligation of good faith for all participants in a contract governed by the UCC. Since Jerry has purchased his jacket from a retail store, the UCC and this obligation will apply.

But what is the obligation of good faith? According to the UCC, good faith “means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.” Notice how there are two elements to this standard: (1) each party must be honest and (2) behave according to reasonable commercial standards. Of course, the duty of good faith only applies to ambiguities in a contract. Where there are specific terms and conditions within a contract, those will determine how each party can act.

We don’t know exactly what the store’s return policy is, so we’ll have to assume that when the store clerk says they only accept returns “if there was some problem with the garment. If it were unsatisfactory in some way, then” they could process the return. But “spite,” according to the clerk, does not fit into any of those categories. This means that in order for a return based upon “spite” to be successful, it must conform with good faith.

When Jerry attempts to make the return, he fails to fulfill his obligation of good faith. He is honest that he only wants to return the coat for spite; purely to prevent Craig from earning a commission on the sale. But this, however, does not conform with the reasonable commercial standards of fair dealing. While there are no hard and fast rules for reasonability, it seems likely that a store should accept a return because the item did not fit as expected, but could deny a return simply to deny an employee a commission. In fact, this very episode and Jerry’s behavior was cited in a Maryland case as an example of a party acting in bad faith.

Although Jerry does attempt to later change his answer to that “he didn’t want” the jacket, this is already too late in the process. This type of post hoc change in argument was properly rejected by the store clerk, since it was clear that it was not the true reason that Jerry intended to return the jacket. As bizarre as it sounds, once Jerry stated his reason for returning the jacket he could no longer change his mind without good reason. Since it was clear that he only said “I don’t want it and then that’s why I’m returning it” in order to comply with store policy, he was not acting in good faith.

Jerry could have been permitted to return the item for spite had the store’s policy stated something like “all returns are permitted,” or “returns permitted at customer discretion within 14 days.” But without this kind of specific permission, Jerry must comply with the principles of good faith when dealing with the store.

And it isn’t good faith to return an item just for spite.