COURSE OF PERFORMANCE
Evidence of the conduct of parties concerning the execution of obligations under a contract requiring more than one performance that is used for the purpose of interpreting the contract’s provisions.
Course of performance refers to the system-
atic and uniform conduct in which parties
engage after they enter into a contract. The
intent of the parties in regard to the meaning of
the agreement is reliably ascertainable through
the application of course of performance only
when a contract requires a repetitive series of
performances. There must be more than one
performance, but no particular number is
required. The fewer the performances, the more
probable it is that such performances cannot
constitute a course of performance.
If a party accepts a course of performance
without objection, his or her ACQUIESCENCE is
relevant to determining the meaning of the con-
tract. The recipient of the performance need not
expressly assent to the performance; the lack of
an objection is sufficient. Unless there has been
acceptance without objection, a party who per-
forms cannot benefit from the application of
course of performance.
Sometimes the acts of the parties may be
inconsistent with the pertinent contractual lan-
guage. A party may argue that the meaning of
the agreement is unequivocal—that the course
of performance is inconsistent with the contract
provisions—and, therefore, that the express
terms of the contract should predominate over
the course of performance.
The prevailing view is that no contractual
term is so clearly defined that a party cannot
demonstrate the way in which the parties actu-
ally applied it. Pursuant to the admissibility of
the course of performance, and assuming that
this evidence is credible, the language selected by
the parties has the meaning that they had
ascribed to it, and, therefore, no inconsistency
exists between the contract provisions and the
course of performance.
A minority of jurisdictions hold that some
words have a PLAIN MEANING and, conse-
quently, that course of performance is inadmis-
sible to show their meaning when they are not
ambiguous. Other courts reason that it is rele-
vant to show that there has been either a waiver,
an intentional relinquishment of a known right,
or a modification of the contract before the
application of course of performance.
The concept of course of performance in the
context of contract law, along with such con-
cepts as course of dealing and TRADE USAGE,is
derived largely from the work of ARTHUR LIN-
TON CORBIN. One of the leading theorists in the
field of contract law in the twentieth century,
Corbin did not believe that courts should be
bound by a formal reading of the “four corners”
of the contract. Corbin was instrumental in the
drafting of the UNIFORM COMMERCIAL CODE
(UCC), which governs commercial agreements
and transactions in most states. Under the UCC,
courts may consider course of performance of the
parties in order to determine, for example,
whether the parties have formed a contract for the
sale or lease of goods (U.C.C. §§ 2-208, 2A-207).
CROSS-REFERENCES
Plain-Meaning Rule.
