Satisfaction Guaranteed Legal Definition:

A term in a sales or services contract in which the seller defers to the buyer the sole and unilateral discretion as to whether or not the goods or services tendered are acceptable. In the event the price is not paid, no cause of action exists unless the buyer acting in good faith is satisfied, no matter how good the goods or services are in terms of quality.
In one American case, the plaintiff was to make a bust of the defendant's deceased husband satisfactory to her.1 The court held that it was for her alone to determine whether it was so, and that it was not enough to show that her dissatisfaction was unreasonable.

  Further, another case was for a suit of clothes.2 The Court ruled:

"It is not for any one else to decide whether a refusal to accept is or is not reasonable, when the contract permits the defendant to decide himself whether the articles furnished are to his satisfaction."

Satisfaction guaranteedThe law3 has since made a distinction as explained in Pennington V. Howland, 21 R.I 65 (1898):

"There are) two classes of cases with reference to which a distinction has been made.
"One class is that which involves personal taste and judgment, examples of which we have shown.

"The other class is that where the subject-matter of the contract is such that the satisfaction stipulated for must be held to apply to quality, workmanship, saleability, and other like considerations, rather than to personal satisfaction. For example, if one agrees to sell land with a satisfactory title, and shows a title valid and complete, the parties must have intended such a title to be satisfactory, rather than to leave an absolute right in the purchaser to say I am not satisfied, when no reason could be shown why he should not be satisfied. So, if one agrees to do work in a satisfactory manner, it must mean a workmanlike manner - as well as it would be expected to be done - rather than a merely personal or whimsical rejection."

More recently, this was restated in Silvestri v. Optus Software, Inc. (2003) 175 NJ 113:

"Agreements containing a promise to perform in a manner satisfactory to another, or to be bound to pay for satisfactory performance, are a common form of enforceable contract.

"Such satisfaction contracts are generally divided into two categories for purposes of review: contracts that involve matters of personal taste, sensibility, judgment, or convenience; and contracts that contain a requirement of satisfaction as to mechanical fitness, utility, or marketability.

"The standard for evaluating satisfaction depends on the type of contract. Satisfaction contracts of the first type are interpreted on a subjective basis, with satisfaction dependent on the personal, honest evaluation of the party to be satisfied. The party to be satisfied is the sole judge of his or her satisfaction....

"If the party to be satisfied asserts in good faith that he or she is not satisfied, there can be no inquiry into the reasonableness of his or her attitude. Absent language to the contrary, however, contracts of the second type - involving operative fitness or mechanical utility - are subject to an objective test of reasonableness, because in those cases the extent and quality of performance can be measured by objective tests."

References:

  • Boiler Co. v. Garden 101 N. Y. 387 (note 3)
  • Brown v. Foster 113 Mass. 136 (note 2)
  • Duhaime, Lloyd, Thanks Judy (LawMag, 24 June 2007)
  • Goldthorpe v Logan (1943) 2 DLR 519 (ONCA) summarized in Duhaime, Lloyd, Offer and Acceptance
  • Zaleski v. Clark 44 Conn. 218 (1876) (note 1)

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