Also known as:usages of trade · trade usage · trade usages · custom and usage
Written by attorneys · grounded in primary & secondary sources — see below
A practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to a particular agreement. It may include a system of rules regularly observed even though particular rules are changed from time to time. Unless otherwise agreed, a usage of trade in the vocation or trade in which the parties are engaged or of which they know or have reason to know gives meaning to or supplements or qualifies their agreement.
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How it applies
Common Examples
6
Consistent Interpretation With Trade Usage
Union Steel contracted with Unison Media to supply steel beams for a studio build. The writing set a base price but was silent on fuel surcharges. In the regional steel trade, suppliers routinely add variable fuel surcharges tied to public indices when prices rise, and both parties routinely encounter such contracts. After fuel prices rose, Union Steel invoiced the surcharge. Unison Media refused payment, claiming the writing controlled. A court interpreted the parties' manifestations as consistent with the relevant usage of trade under the governing rule.
Express Terms Override Usage
Umar Usmani ordered custom parts from Utopia Pharmaceuticals under a writing that fixed the price without any surcharge clause. In the pharmaceutical supply trade, sellers commonly add fuel surcharges when costs rise. After prices rose, Utopia invoiced a surcharge. Umar refused, pointing to the fixed-price term. The court gave the express term greater weight than the usage of trade and denied the surcharge.
Regular Observance Defines Usage
Ulrike Ulrich, a grain broker, bought wheat from Ulric Unger under a contract silent on quality tolerances. In the regional grain trade, buyers and sellers routinely accept lots with up to two percent foreign material without objection. After delivery, Ulrike rejected the lot for one percent foreign material. Ulric proved the tolerance through testimony of regular observance. The court found a usage of trade existed and supplemented the agreement.
Trade Usage Supplements Price Term
Nanakuli Paving contracted with Shell Oil for asphalt under long-term supply agreements silent on price protection. In the asphalt paving trade in Hawaii, suppliers routinely gave buyers advance notice and price protection before increases. Shell raised prices without notice. Nanakuli sued. The court found the usage supplemented the agreements and held Shell liable for breach.
Nanakuli Paving & Rock Sales, Inc. v. Shell Oil Co.664 F.2d 772 (9th Cir. 1991)
Usage Does Not Create Impracticability
Transatlantic Financing chartered a vessel to carry wheat from the United States to Iran. The writing was silent on route. After the Suez Canal closed, Transatlantic claimed the voyage became commercially impracticable. Evidence showed no established usage in the shipping trade requiring the canal route. The court refused to imply such a usage and denied the impracticability defense.
Transatlantic Financing Corp. v. United States363 F.2d 312 (D.C. Cir. 1966)
Usage Fails Without Regular Observance
Frigaliment Importing bought chickens described as "Grade A" from B.N.S. The writing said nothing about size or age. Frigaliment claimed a trade usage required young birds suitable for broiling. B.N.S. showed no such regular observance existed among exporters. The court found no usage of trade and enforced the contract according to its plain terms.
Frigaliment Importing Co. v. B.N.S. International Sales Corp.190 F. Supp. 116, 117 (S.D.N.Y. 1960)
Common questions
Frequently Asked
5
How does a court determine whether a usage of trade exists and what its scope is?+
The existence and scope of a usage of trade are questions of fact proved by evidence of regularity of observance in the relevant place, vocation, or trade. When the usage is embodied in a written trade code, the court interprets the writing as a question of law. Expert testimony commonly establishes the usage.
Supporting sources
When may usage of trade supplement or qualify an agreement?+
Unless otherwise agreed, a usage of trade in the vocation or trade in which the parties are engaged or of which they know or have reason to know gives meaning to or supplements or qualifies their agreement. The usage must be reasonable and the parties must have reason to know of it.
Supporting sources
What happens when an express term conflicts with a usage of trade?+
Express terms are given greater weight than usage of trade. When the two cannot reasonably be construed as consistent, the express term controls. Courts first attempt to interpret the parties' manifestations as consistent wherever reasonable.
Supporting sources
Can a party avoid a usage of trade by showing a contrary intention?+
Yes. A usage supplements an agreement only if neither party knows or has reason to know that the other intends something inconsistent with the usage. Clear expressions during negotiations that reject the usage prevent it from applying.
Supporting sources
How does usage of trade interact with course of dealing and course of performance?+
Course of performance receives greater weight than course of dealing or usage of trade, and course of dealing receives greater weight than usage of trade. All three may be used to interpret or supplement an agreement when consistent with express terms.
Supporting sources
custom and usage
or other objective standards of which the parties had clear notice. Here, evidence of
custom and usage
regarding price protection in the asphaltic paving
trade
was not contradicted in major…
or course of performance as provided in Titles 1 through 10 of this article. Rite Aid argues that for an affirmation to become "part of the basis of the bargain," the affirmation must be a…
ContractsContract content and meaning · Omitted and implied termsUBEIntermediate