Morin Bldg. Prods. Co. v. Baystone Constr., Inc.
717 F.2d 413 (1983)
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Rule of Law:
In contracts containing a satisfaction clause for work of a commercial or utilitarian nature, performance is to be judged by an objective 'reasonable person' standard, unless the contract language or circumstances clearly indicate that the parties intended to apply a subjective standard based on personal aesthetic taste.
Facts:
- General Motors (GM) hired Baystone Construction, Inc. to build an addition to a Chevrolet plant.
- Baystone subcontracted with Morin Building Products Company to supply and erect the aluminum walls for the addition.
- The contract required the walls to have a 'mill finish' and stated that all work was subject to the final approval of GM's agent, whose decision regarding 'artistic effect' would be final.
- A separate clause stated that the owner's decision on the quality and fitness of materials was final and must be 'first class in every respect.'
- After Morin installed the walls, GM's representative rejected them because the finish appeared non-uniform when viewed in bright sunlight from an acute angle.
- Baystone removed Morin's siding, hired another subcontractor to replace it, and refused to pay Morin the remaining balance on the contract.
Procedural Posture:
- Morin Building Products Company sued Baystone Construction, Inc. in federal district court for the balance of the contract price.
- The case was tried before a jury.
- The trial court judge instructed the jury to apply an objective 'reasonable person' standard to determine if the performance was satisfactory.
- The jury returned a verdict in favor of the plaintiff, Morin.
- Baystone, the defendant-appellant, appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit, arguing the jury instruction was incorrect.
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Issue:
Does an objective 'reasonable person' standard apply to a satisfaction clause in a commercial construction contract for a factory, even when the contract mentions 'artistic effect'?
Opinions:
Majority - Posner
Yes, the objective 'reasonable person' standard applies. In contracts involving commercial quality, operative fitness, or mechanical utility, courts prefer an objective standard to determine satisfaction. A subjective standard of good faith is reserved for contracts involving personal aesthetics or fancy. This case involves the construction of a factory, a utilitarian structure where function and cost are primary. The contract specified 'mill finish' aluminum, a product known in the trade for having a non-uniform finish. The language regarding 'artistic effect' and 'first class' quality was part of a general purpose form contract and likely not intended to subject Morin's performance to the aesthetic whim of the owner's agent for a functional factory wall. Therefore, the proper question is whether a reasonable person would have been satisfied that the work met the contract's requirements.
Analysis:
This decision solidifies Indiana's adoption of the majority rule (Restatement § 228) for interpreting satisfaction clauses, creating a default preference for an objective standard in commercial contracts. The court's analysis demonstrates a functional approach, prioritizing the purpose of the contract (utility vs. aesthetics) over a literal reading of boilerplate language like 'artistic effect.' This provides greater protection for performing parties in commercial agreements against arbitrary or unreasonable rejections, ensuring that form contract language does not override the practical realities and intentions of the parties in a utilitarian project.
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