Duty to act in Good Faith
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Statutes
Every contract or duty within this title imposes an obligation of good faith in its performance and enforcement. Alabama Commercial Code (Ala.Code 1975 ยง 7-1-304)
Cases
"In 1991 the 11th Circuit Court of Appeals found that Alabama common law imposes burdens on lessors that prevent them from unreasonably or capriciously withholding consent to a sublease. In Chrysler Capital Corporation v. Lavender, the lessor leased bumper stamping and plating equipment to the lessee. When the lessee arranged for a sublease, the lessor withheld its consent to the sublease unless the sublessee would agreed to assume all of the lessee's obligations under the original lease. 934 F.2d 290, 293 (11th Cir. 1991). The court applied an Alabama common law rule generally applied with respect to real property, holding that Under Alabama law, ""a landlord may not unreasonably and capriciously withhold his consent to a sublease agreement. The landlord's rejection should be judged under a test applying a reasonable commercial standard."" Id.
However, recently the Alabama Supreme Court held differently. We disagree with Chrysler Capital to the extent that it may be inferred from that opinion that a commercial-reasonableness standard will be applied to all rejections of assignees or sublessees whether or not the right to reject has been reserved to the landlord in his sole discretion. Shoney's LLC v. MAC East, LLC 27 So. 3d 1216, 1221(2009)
Where the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ""sole discretion"" is also to be construed as written. ""'[W]here the language is unambiguous, and but one reasonable construction of the contract is possible, it must be expounded as made, as the courts are not at liberty to make new contracts for the parties. Id at 223(citations omitted). Leases in Alabama should provide that the Lessor may refuse to permit subleases in its sole discretion."
However, recently the Alabama Supreme Court held differently. We disagree with Chrysler Capital to the extent that it may be inferred from that opinion that a commercial-reasonableness standard will be applied to all rejections of assignees or sublessees whether or not the right to reject has been reserved to the landlord in his sole discretion. Shoney's LLC v. MAC East, LLC 27 So. 3d 1216, 1221(2009)
Where the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ""sole discretion"" is also to be construed as written. ""'[W]here the language is unambiguous, and but one reasonable construction of the contract is possible, it must be expounded as made, as the courts are not at liberty to make new contracts for the parties. Id at 223(citations omitted). Leases in Alabama should provide that the Lessor may refuse to permit subleases in its sole discretion."
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Contributors
Barry Marks
The statutory information was edited and reviewed with the support of MultiState
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