Burton is a Vermont-based designer, manufacturer, and seller of snowboards. ViQuest is a manufacturer of injection-molded products based in Shanghai, China. Burton and ViQuest contracted for ViQuest to manufacture Burton’s snowboard bindings. 

The agreement also contained the following provisions:

1. The agreement’s initial term was one year, with automatic successive one-year renewals.
2. Burton could terminate the Agreement at any time if it determined that “ViQuest's financial position posed a risk to Burton’s business.” 
3. Any dispute between the parties would go to arbitration.

The agreement automatically renewed for a second one-year period. Things appeared to be going well until, two months later, when Burton unexpectedly terminated the agreement, claiming that “ViQuest’s financial position” was too risky. However, the opposite seemed to be true: Burton owed ViQuest approximately $1.8 million in unpaid purchase orders, which it refused to pay. 

An arbitration panel ruled for ViQuest after it determined that Burton’s reasons for terminating the contract lacked any basis in fact and was in bad faith. Burton asked that the court vacate the award, claiming the arbitrators misconstrued the contract by imposing an additional duty to prove that ViQuest was indeed risky. A court reviewed the panel’s decision. 

Questions:

1. Did Burton’s terminate the contract in bad faith?

2. In general, what does “good faith” mean?

3. What does “good faith” mean between merchants?