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Abstract

In the 1980s the contractual obligation of good faith and fair dealing achieved preeminence in the area of lender liability. This raised concerns that expansive judicial interpretation of the obligation would, in effect, rewrite the parties' contracts and result in the imposition of undue economic liability upon lenders. In this Article Professor Overby first traces the statutory, common law, and theoretical attempts to provide transactors with legal standards of conduct through the obligation of good faith. She then examines the judicial approaches to good faith in the lending context, rejecting as unfounded concerns over economic liability or widespread judicial activism. Professor Overby demonstrates that the underlying divergence in the courts over proper interpretation of the obligation of good faith is the primary cause of the "lender liability crisis " Finally, the Article proposes an "effectiveness of express terms" approach to good faith lending under which the obligation of good faith in no way overrides the explicit terms of the lending agreement absent proof of opportunism.

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