Also known as: ordinary course of business
Written by attorneys · grounded in primary & secondary sources — see below
A course of conduct or practice that conforms to the usual or customary operations of a business entity. It encompasses transactions and activities routinely undertaken in the entity's field or by the entity itself.
Northstar Logistics sold used navigation gear to a maritime chandlery. The chandlery paid value, took possession, and had no actual knowledge that the sale violated a lender's security interest. The sale followed the shipping company's occasional practice of disposing of used equipment. The chandlery therefore took the gear free of the security interest.
Nexus Technologies partner Nadia Novak misapplied client funds while handling routine project billing. The firm had authorized her to receive and manage such payments in its daily operations. A client sued the partnership for the resulting loss. The partnership is liable because Novak acted within its ordinary course.
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Nightingale Healthcare received a subpoena for patient records. It produced the files exactly as stored in its electronic system without reorganization. The production satisfied the requirement to deliver documents as kept in ordinary operations.
Nimbus Cloud partners voted on whether to lease additional server space to meet seasonal demand. Three of the four partners approved the lease. The decision stands because leasing capacity falls within ordinary business operations.
A buyer acts in the ordinary course when the purchase comports with the seller's usual or customary practices in selling goods of that kind and the buyer acts in good faith without actual knowledge that the sale violates another's rights. Occasional sales can qualify if they align with the seller's own practices.
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A partner's act is in the ordinary course when it occurs during the partnership's regular business or under actual or apparent authority. The partnership is then liable for resulting loss or injury even if the specific conduct was wrongful.
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A responding party satisfies the rule by producing documents exactly as kept in its regular filing system. Reorganization is required only if the documents are not produced in that native format.
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Acts outside the ordinary course of business and amendments to the partnership agreement require unanimous consent. Routine operational matters may be decided by majority vote.
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