Market Street Associates Ltd. Partnership v. Frey
United States Court of Appeals, Seventh Circuit, 1991.
941 F.2d 588.


Market Street leased a shopping center from General Electric Pension Trust (JC Penny originally had the lease, but assigned it to Market Street). Paragraph 34 of the agreement entitled Market Street to request financing for improvements, and that the request would be given “reasonable consideration.” If an agreement couldn’t be reached, the property could then be bought back at the price it was sold for, plus 6% for each year it was leased.

  • Orenstein, Market Street’s general partner, wrote a letter to the pension trust, requesting funding for $2 million in improvements.
  • However, he never mentioned paragraph 34.
  • When the request was turned down (because the pension trust was not interested in loans less than $7 million), Orenstein then notified the pension trust that they were exercising their right to buy the property.
  • The pension trust refused to sell, so Market Street sued for specific performance.


The district judge granted summary judgment for the pension trust on two grounds:

(1) By never mentioning paragraph 34, Market Street prevented the requisite negotiations over financing.

(2) This failure violated the duty of good faith.

The judge inferred that Market Street never wanted the financing, they were just interested in buying the property at a bargain, and hoped that they pension trust wouldn’t realize the implications of turning the request down.


Whether Market Street tried to trick the pension trust and succeeded in doing so.


Reversed and remanded in order to make that determination.


  • “The district judge jumped the gun in choosing between the alternative characterizations.” (In regards to if Orenstein believed that the pension trust would find out about the clause, or if Orenstein was trying to trick them.)
  • The court also stated that they usually do not excuse parties from failing to read and understand the contents of their contracts – especially when it’s an “immensely sophisticated enterprise” like GE.


  • On remand, they ruled that Market Street was trying to trick to GE.
  • The concept of good faith and fair dealing applies to conduct occurring after formation of the contract, not conduct prior to and during the formation. (That’s where doctrines such as unconscionability, misrepresentation, undue influence, duress, etc., come into play.)

“Good faith and fair dealing” generally means

(1) honesty in fact;

(2) faithfulness to an agreed common purpose; and

(3) consistency with the justified expectations of the other party.