COURSE OF DEALING
A clearly recognizable pattern of previous conduct
between parties to a business transaction.
The course of dealing between parties to an
action is examined by a court in ascertaining
what the parties intended when they entered
into a contract. The supposition is that the par-
ties drew up the contract in view of the custom-
ary manner in which business had been
transacted prior to the signing of the contract.
In a breach-of-contract action, evidence of
the course of dealing is admissible in order to
interpret ambiguities in the contract, but not to
effectuate an alteration or contradiction of the
contract’s provisions. A term that was seemingly
unambiguous when the contract was entered
into might subsequently prove to be problem-
atic.
Course of dealing is distinguishable from
both COURSE OF PERFORMANCE and TRADE
USAGE. Course of performance refers to a pat-
tern of conduct that occurs subsequent to
approval of the contract terms. Trade usage
entails behavior that is the standard of conform-
ity for a majority of businesses engaged in a par-
ticular business or commercial venture.
Course of dealing safeguards the expectations
of the parties and augments the certainty of their transactions, based upon their prior
experiences with each other.
The concepts of course of dealing, course of
performance, and trade usage in the context of
contract law are derived largely from the work
of LINTON CORBIN, who did not believe that
courts should be bound by the so-called four
corners of a contract or to the “plain meaning”
to those terms. Corbin was instrumental in the
drafting of the UNIFORM COMMERCIAL CODE
(UCC), which governs commercial agreements
and transactions in most states. The UCC
defines course of dealing in its general provisions
(U.C.C. § 1-205). The term applies, for
example, to the laws governing contracts for the
sale of goods, negotiable instruments, and
SECURED TRANSACTIONS.
