664 F.2d 772 (9th Cir. 1981)
Nanakuli Paving & Rock Co. v.
Whether a party can enforce a price protection term based on prior conduct and industry trade usage under the UCC, despite the absence of explicit terms.
Under the Uniform Commercial Code (UCC), good faith in performance and enforcement entails observing reasonable commercial standards of fair dealing. A contract may include implied terms based on trade usage, course of dealing, or performance that supplement or qualify the written terms.
The court held that Shell Oil Co. had to abide by the implied price protection term given the established course of dealing and usage of trade, requiring Shell to act in good faith to protect Nanakuli from sudden price increases.
This case is instrumental for law students as it demonstrates the substantial impact of implied terms under the UCC. It teaches the importance of past conduct and industry customs in contract interpretation, showing that contracts are not always confined to their explicit terms. Students learn how courts use equitable doctrines to ensure fairness and uphold the spirit of the agreement, particularly focusing on the good faith principle.