At trial, Nautilus argued that the contract was an output contract, and that evidence regarding harvest quantity estimates and historical projections should be admitted to show that VFDA's actual harvest was unreasonably small, given the commercial expectations of the parties. The superior court sustained an objection to the admission of this evidence. It concluded that the contract unambiguously defined the parties' obligations, that extrinsic evidence regarding the parties' expectations was therefore unnecessary, and that the jury need only be instructed on an integrated contract. This covenant cannot be disclaimed or waived by the parties. The covenant of good faith applies to all aspects of the contract, including its performance and enforcement.
Good faith means honesty in fact.
Good faith and fair dealings also mean that the parties must adhere to reasonable commercial standards and commercial reasonableness. However, if reasonable commercial standards and commercial reasonableness appear to conflict with the express terms of the parties' contract, the express terms of the contract control. First, Nautilus contends that the superior court erroneously concluded that the contract was not an output contract. Nautilus argues that because the contract was an output contract, evidence regarding VFDA's harvest quantity estimates and historical projections was wrongfully excluded, since such evidence would have been relevant in determining whether VFDA's output was reasonable, given the parties' commercial expectations. Second, Nautilus argues that the superior court erroneously instructed the jury on the effect of acceptance of a check on an underlying contractual obligation.