Section 12(a) and section 15(a)(1) of the Act provide that a
purchaser must acquire the goods in good faith in reliance on the
specified written assurance in order to be accorded the statutory
protection.
The legislative history of the amendments indicates that a purchaser's
good faith is not to be determined merely from the actual state of his
mind but that good faith also depends upon an objective test--that of
what a ``reasonable, prudent man, acting with due diligence, would have
done in the circumstances.'' This good faith requirement is, in the
words of the House Managers, ``comparable to similar requirements
imposed on purchasers in other fields of law.'' The final determination
of what will amount to good faith can be made only upon the basis of the
pertinent facts in each situation.
It is clear, however, that good faith as used in the Act, not only
requires honesty of intention but also that a purchaser must not know,
have reason to know, or have knowledge of circumstances which ought to
put him on inquiry that the goods in question were produced in violation
of any of the provisions of the Act referred to in sections 12(a) and
15(a)(1).
These good faith provisions are reinforced by the requirement in
sections 12(a) and 15(a)(1) that the purchaser must also acquire his
goods ``for value without notice'' of an applicable violation of the
Act.
To illustrate the application of the above principles, let us assume
that a purchaser of goods for value acquires them in reliance upon a
written assurance from the producer, manufacturer, or dealer that the
particular goods were produced in compliance with all applicable
requirements of the Act, and that the form and content of the assurance
is sufficient to meet the conditions of sections 12 and 15(a)(1) of the
Act. If a reasonable, prudent man in the purchaser's position, acting
with the diligence, would have no reason to question the truth of the
assurance that the applicable requirements has
been complied with, the purchaser's reliance on such written assurance
would be considered to be in good faith and without notice of any
violation, and the purchaser would be protected in the event that
violations of the child-labor or the wage-hour standards of the Act had
actually occurred in the production of such goods by the vendor or by
prior producers of the goods. In such circumstances, the purchaser's
protection would not be contingent on his securing separate written
assurances from the prior producers or on his assuring himself that his
vendor had secured specific guarantees from them with respect to
compliance.
