IMPUESTOS

The preceding analysis offers one possible foundation for a default rule requiring reasonable notice of employment termination consistent with mainstream contract law. However, that is as far as it goes. By definition, default rules (and contract gap fillers more generally) apply only in the event that parties fail to directly address a particular issue in their contract. Were a comparable rule adopted in the employment context, employers could reinstitute the current “no notice” system by insisting that their employees sign written agreements to that effect.182

Under the UCC, however, the ability to alter default terms must be understood in relationship to broader contractual obligations of good faith. As the comment to § 2-309 explains, the reasonable notice default recognizes that “the application of principles of good faith and sound commercial practice normally call for such notification . . . as will give

the other party reasonable time to seek a substitute arrangement.”183

Since parties have only limited ability to contract out of good faith, their ability to avoid reasonable notice obligations is similarly constrained. Indeed, § 2-309 states that an agreement limiting or dispensing with

notice is unenforceable “if its operation would be unconscionable.”184

This language could be interpreted to disallow immediate termination based on extreme hardship to the losing party, notwithstanding a contract provision purporting to grant that right.

For a reasonable notice rule to provide a modicum of protection to workers, it is important to similarly moor the doctrinal arguments in favor of such an approach to deeper components of contractual obligation within the employment relationship. As in the UCC context, the universally implied contractual duty of good faith can provide that anchor. Good faith is an obligation inherent in every contract, including,

according to most courts, employment contracts.185 Its purpose is to

182. See generally Arnow-Richman, Just Notice, supra note 8, at 66–67 (discussing this risk); Daniel J. Libenson, Leasing Human Capital: Toward a New Foundation for Employment Termination Law, 27 BERKELEY J.EMP.&LAB.L. 111, 174 (2006) (expressing skepticism about a waivable notice right, observing that “[t]he reality . . . is that employees will agree to just about anything an employer wants. Whether this is due to employee desperation, inequality of bargaining power, signaling concerns, or lack of information, permitting employers and employees to bargain around the mandatory notice requirement would likely make it worthless”).

183. U.C.C. § 2-309 cmt. 8 (2012).

184. See id. § 2-309(3). Section 1-302(b) specifies that when the UCC provides for an action “to be taken within a reasonable time,” parties may fix a particular timeframe that is not “manifestly unreasonable.” Id. § 1-302(b).

185. Seeid. § 1-304; RESTATEMENT (SECOND) OF CONTRACTS § 205 (1981); RESTATEMENT (THIRD) OF EMPLOYMENT LAW § 2.07 (2009) (“Each party to an employment contract, including at-will employment, owes a non-waivable duty of good faith and fair dealing to each other party.”). For an example of the application of the implied duty of good faith in the employment

limit unbridled use of discretion. Its effect is to preclude behavior that otherwise would be permitted under a strict reading of the parties’ express contract.

Two well-developed theoretical approaches to good faith have framed the contemporary understanding of the scope of the duty within the mainstream contracts literature: Professor Robert Summers’s

“excluder” approach186 and Professor Steven Burton’s “forgone benefit

approach.”187 The excluder approach embraces a broad notion of good

faith, incapable of specific definition, that prohibits a variety of behaviors that may occur during performance—evasion and delay, willful underperformance, obstructing performance, and similar

conduct.188 In contrast, the foregone benefit approach finds a breach of

the duty only where a party abuses contractually conferred discretion to

recapture opportunities sacrificed at contract formation.189 Under such

an approach, the implied duty applies principally to situations in which a party attempts to withhold or obstruct the flow of benefits rightfully allocated by the contract to his or her opponent.

As a matter of general contract doctrine, the broad excluder approach has won the day. The Restatement (Second) of Contracts explicitly adopts an expansive view of good faith, one that “emphasizes . . . consistency with the justified expectations of the other party” and excludes conduct that “violate[s] community standards of

decency, fairness or reasonableness.”190 The UCC draws on this

approach in setting forth its previously described gap filler provisions, which amount to specific elaborations on the doctrine. These principles all impose an obligation to act “reasonably” and “in good faith” with respect to matters on which the contract is vague or silent or permits significant latitude to one party.191 Thus, for instance, a party must act reasonably and in good faith in setting an open quantity term tied to its context, see Fortune v. Nat’l Cash Register Co., 364 N.E.2d 1251, 1257 (Mass. 1977). As will be discussed, however, the contours of the duty are limited in the employment context. See infra

Section IV.B.

186. See Robert S. Summers, “Good Faith” in General Contract Law and the Sales Provisions of the Uniform Commercial Code, 54 VA. L. REV. 195, 207 (1968) [hereinafter Summers, Good Faith]; Robert S. Summers, The General Duty of Good Faith—Its Recognition and Conceptualization, 67 CORNELL L.REV. 810, 818–21, 825–30 (1982) [hereinafter Summers,

General Duty].

187. See Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 HARV.L.REV. 369, 372–73 (1980).

188. See Summers, Good Faith, supra note 186, at 204.

189. See Burton, supra note 187, at 387–88. For an excellent summary of these two theories, see Emily M.S. Houh, Critical Interventions: Toward an Expansive Equality Approach to the Doctrine of Good Faith in Contract Law, 88 CORNELL L.REV. 1025, 1033–49 (2003). 190. RESTATEMENT (SECOND) OF CONTRACTS § 205 cmt. a (1981).

191. See, e.g., U.C.C. § 2-305(2) (2012) (“A price to be fixed by the seller or by the buyer means a price to be fixed in good faith.”).

output, production requirements, or other fluctuating benchmarks.192 In this way the doctrine ensures that parties abide by an implicit code of business ethics during the life of their agreement.

While good faith serves largely to moderate party performance and

preserve contractual relationships, § 2-309 makes clear that it also

resonates at the point of termination, particularly in the context of long- term contracts.193 As the court in Pharo puts it, it is an obligation that is grounded in “fairness and equity” and designed to grant the losing party time to “‘get[] his house in order’ to proceed in absence of the former relationship.”194