Also known as: honest in fact · good faith
Written by attorneys · grounded in primary & secondary sources — see below
A subjective standard of good faith that requires actual honesty in the conduct or transaction concerned without regard to external commercial norms.
Hugo Hart missed two mortgage payments on his home. The lender declared the full balance due under the acceleration clause. Hugo showed he had mailed the payments on time and the lender's records confirmed receipt before the declaration. The court found the lender lacked honesty in fact because it knew the payments had arrived.
Highland Farms received a deposition subpoena describing topics about its supply contracts. Its counsel met with the serving party but refused to designate any officer who possessed the requested information. The court ordered a new conference after finding the refusal showed a lack of subjective good faith about what the company actually knew.
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Henry Hoffman filed a derivative suit alleging self-dealing by directors of Hudson Partners. The board formed a committee that met once and concluded the suit was not in the company's best interests. The court denied the motion to dismiss because the committee's cursory review lacked subjective good faith about the underlying facts.
Hannah Hale asked her lawyer whether she could backdate documents to reduce her tax liability. The lawyer discussed the legal risks and penalties but refused to prepare the documents. The ethics board found the lawyer acted with subjective good faith by limiting assistance to discussion of consequences rather than enabling fraud.
Hector Huerta, a journalist, received a grand jury subpoena seeking his source for a story about public corruption. He appeared and answered every question about his own knowledge while refusing only to name the source. The court upheld the subpoena because the investigation proceeded in good faith and Hector testified about facts within his personal knowledge.
Hazel Hoffman fell behind on her home loan. The servicer sent a notice of default that omitted the required cure period. When Hazel offered to cure, the servicer accelerated anyway. The court halted the foreclosure because the servicer failed to act with subjective good faith throughout the process as required by the uniform act.
No. The subjective standard of honesty in fact focuses solely on whether the actor actually believed the facts to be true and acted without deceit. Courts applying the UCC have held that a party satisfies honesty in fact even if its conduct later appears commercially unreasonable, provided it lacked actual knowledge of falsity.
Honesty in fact supplies only the subjective component. Revised UCC § 1-201(b)(20) adds an objective requirement that the actor also observe reasonable commercial standards of fair dealing. A party may therefore satisfy honesty in fact yet still fail the combined test if its conduct deviates from industry norms.
Yes. A transferee must take an instrument in good faith, which includes honesty in fact. Courts have denied HDC protection where the transferee knew the instrument was issued in reliance on checks the bank intended to dishonor, even though the transferee claimed a subjective belief in the transaction's legitimacy.
…was not to be found guilty of the offense "unless it is proved that the act which caused the death of the child was not done in good faith for the purpose only of preserving the life of the mother." A seemingly notable development in the English law was the case of Rex v. Bourne , [1939] 1 K. B. 687. This case apparently…