Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 4

FACTS Peter Amaya, a medical student at Indiana University School of Medicine (IUSM), took a group examination covering several subjects. Three professors observed Amaya and concluded that he was cheating by looking at another student's paper. After the exam, two of the professors confronted Amaya. He denied cheating and maintained that he was merely looking over at the clock on the wall. Soon after, IUSM Dean Craig Brater dismissed Amaya from the school. Amaya filed a complaint in an Indiana state court against Brater and IUSM, alleging breach of contract and breach of the duty of good faith and fair dealing. The court granted IUSM's motion for summary judgment. Amaya appealed.
ISSUE Does the duty of good faith and fair dealing apply only to contracts for sales of goods?
DECISION Yes. A state intermediate appellate court affirmed the judgment in IUSM's favor. Amaya's separate causes of action for alleged breaches of contract and the duty of good faith and fair dealing were inappropriate.
REASON The reviewing court noted that, "The duty of good faith and fair dealing is a concept created by the Uniform Commercial Code." With respect to the claim of breach of contract, the court pointed out that the legal relationship between a student and her or his university is one of implied contract. "The courts' approach has been similar to that used with contracts conditioned upon the satisfaction of one party. The university requires that the student's academic performance be satisfactory to the university in its honest judgment." IUSM's conclusion that Amaya had failed to maintain acceptable professional standards was a "rational determination arrived after much deliberation and after Amaya had numerous opportunities to be heard."
FOR CRITICAL ANALYSIS-Ethical Consideration The UCC's duty of good faith and fair dealing may not apply to the contract that exists between a university and its students, but the school cannot act in bad faith. How is "bad faith" defined ? To whom else might a school owe this duty ?