Morin Bldg. Products Co., Inc. v. Baystone Const., Inc., 82-2451

• Decision Date: 16 September 1983
• Docket Number: No. 82-2451,82-2451
• Citation: 717 F.2d 413
• Parties: MORIN BUILDING PRODUCTS COMPANY, INC., Plaintiff-Appellee, v. BAYSTONE CONSTRUCTION, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 413

717 F.2d 413

MORIN BUILDING PRODUCTS COMPANY, INC., Plaintiff-Appellee, v. BAYSTONE CONSTRUCTION, INC., Defendant-Appellant.

No. 82-2451.

United States Court of Appeals, Seventh Circuit.

Argued May 12, 1983.

Decided Sept. 16, 1983.

Alan H. Lobley, Ice, Miller, Donadio & Ryan, Indianapolis, Ind., for defendant-appellant.

Craig Pinkus, Mitchell, Hurst, Pinkus, Jacobs & Dick, Indianapolis, Ind., for plaintiff-appellee.

Before POSNER and COFFEY, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.

POSNER, Circuit Judge.

This appeal from a judgment for the plaintiff in a diversity suit requires us to interpret Indiana's common law of contracts. General Motors, which is not a party to this case, hired Baystone Construction, Inc., the defendant, to build an addition to a Chevrolet plant in Muncie, Indiana. Baystone hired Morin Building Products Company, the plaintiff, to supply and erect the aluminum walls for the addition. The contract required that the exterior siding of the walls be of "aluminum type 3003, not less than 18 B & S gauge, with a mill finish and stucco embossed surface texture to match finish and texture of existing metal siding." The contract also provided "that all work shall be done subject to the final approval of the Architect or Owner's [General Motors'] authorized agent, and his decision in matters relating to artistic effect shall be final, if within the terms of the Contract Documents"; and that "should any dispute arise as to the quality or fitness of materials or workmanship, the decision as to acceptability shall rest strictly with the Owner, based on the requirement that all work done or materials furnished shall be first class in every respect. What is usual or customary in erecting other buildings shall in no wise enter into any consideration or decision."

Morin put up the walls. But viewed in bright sunlight from an acute angle the exterior siding did not give the impression of having a uniform finish, and General Motors' representative rejected it. Baystone removed Morin's siding and hired another subcontractor to replace it. General Motors approved the replacement siding. Baystone refused to pay Morin the balance of the contract price ($23,000) and Morin brought this suit for the balance, and won.

The only issue on appeal is the correctness of a jury instruction which, after quoting the contractual provisions requiring that the owner (General Motors) be satisfied with the contractor's (Morin's) work, states: "Notwithstanding the apparent finality of the foregoing language, however, the general rule applying to satisfaction in the case of contracts for the construction of commercial buildings is that the satisfaction clause must be determined by objective criteria. Under this standard, the question is not whether the owner was satisfied in fact, but whether the owner, as a reasonable person, should have been satisfied with the materials and workmanship in question." There was much evidence that General Motors' rejection of Morin's exterior siding had been totally unreasonable. Not only was the lack of absolute uniformity in the finish of the walls a seemingly trivial defect given the strictly utilitarian purpose of the building that they enclosed, but it may have been inevitable; "mill finish sheet" is defined in the trade as "sheet having a nonuniform finish which may vary from sheet to sheet and within a sheet, and may not be entirely free from stains or oil." If the instruction was correct, so was the judgment. But if the instruction was incorrect--if the proper standard is not whether a reasonable man would have been satisfied with Morin's exterior siding but whether General Motors' authorized representative in fact was--then there must be a new trial to determine whether he really was dissatisfied, or whether he was not and the rejection therefore was in bad faith.

Some cases hold that if the contract provides that the seller's performance must be to the buyer's satisfaction, his rejection-- however unreasonable--of the seller's performance is not a breach of the contract unless the rejection is in bad faith. See, e.g., Stone Mountain Properties, Ltd. v. Helmer, 139 Ga.App. 865, 869, 229 S.E.2d 779, 783 (1976). But most cases conform to the position stated in section 228 of the Restatement (Second) of Contracts (1979): if "it is practicable to determine whether a reasonable person in the position of the obligor would be satisfied, an interpretation is preferred under which the condition [that the obligor be satisfied with the obligee's performance] occurs if such a reasonable person in the position of the obligor would be satisfied." See Farnsworth, Contracts 556-59 (1982); Annot., 44 A.L.R.2d 1114, 1117, 1119-20 (1955). Indiana Tri-City Plaza Bowl, Inc. v. Estate of Glueck, 422 N.E.2d 670, 675 (Ind.App.1981), consistently with hints in earlier Indiana cases, see Andis v. Personett, 108 Ind. 202, 206, 9 N.E. 101, 103 (1886); Semon, Bache & Co. v. Coppes, Zook & Mutschler Co., 35 Ind.App. 351, 355, 74 N.E. 41, 43 (1905), adopts the majority position as the law of Indiana.

We do not understand the majority position to be paternalistic; and paternalism would be out of place in a case such as this, where the subcontractor is a substantial multistate enterprise. The requirement of reasonableness is read into a contract not to protect the weaker party but to approximate what the parties would have expressly provided with respect to a contingency that they did not foresee, if they had foreseen it. Therefore the requirement is not read into every contract, because it is not always a reliable guide to the parties' intentions. In particular, the presumption that the performing party would not have wanted to put himself at the mercy of the paying party's whim is overcome when the nature of the performance contracted for is such that there are no objective standards to guide...