Restat 2d of Contracts, § 222

• Restatement of the Law, Second, Contracts
• Chapter 9- The Scope of Contractual Obligations
• Topic 4- Scope as Affected by Usage
• § 222 Usage of Trade

(1)  A usage of trade is a usage 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.
(2)  The existence and scope of a usage of trade are to be determined as questions of fact. If a usage is embodied in a written trade code or similar writing the interpretation of the writing is to be determined by the court as a question of law.
(3)  Unless otherwise agreed, a usage of trade in the vocation or trade in which the parties are engaged or a usage of trade of which they know or have reason to know gives meaning to or supplements or qualifies their agreement.

Comment:

a.  Relation to other rules.  This Section follows Uniform Commercial Code § 1-205 and states a particular application of the rules stated in §§ 220 and 221. As to conflicting usages of words, see § 202; as to conflict between usage of trade and express terms, course of performance or course of dealing, see § 203.

b.  Regularity of observance.  A usage of trade need not be "ancient or immemorial," "universal," or the like. Unless agreed to in fact, it must be reasonable, but commercial acceptance by regular observance makes out a prima facie case that a usage of trade is reasonable. There is no requirement that an agreement be ambiguous before evidence of a usage of trade can be shown, nor is it required that the usage of trade be consistent with the meaning the agreement would have apart from the usage. When the usage consists of a system of rules, the parties need not be aware of a particular rule if they know or have reason to know the system and the particular rule is within the scheme of the system. A change within the system may have effect promptly, even though there has been no time for regular observance of the change.

Illustrations:

1. A contracts to sell B 10,000 shingles. By usage of the lumber trade, in which both are engaged, two packs of a certain size constitute 1,000, though not containing that exact number. Unless otherwise agreed, 1,000 in the contract means two packs.

2. A contracts to sell B 1,000 feet of San Domingo mahogany. By usage of dealers in mahogany, known to A and B, good figured mahogany of a certain density is known as San Domingo mahogany, though it does not come from San Domingo. Unless otherwise agreed, the usage is part of the contract.

3. A promises to act as B's agent in a certain business, and B promises to pay a certain commission for each "order." By a local usage in that business, "order" means only an order on which the purchaser has paid a certain price. Unless otherwise agreed, the usage is part of the contract.

4. A and B enter into a contract for the sawing of logs during the "winter season." Usage in the logging business may show that "winter season" means the period between the closing of a sawmill in the autumn and the arrival of logs in the spring.

5. A and B enter into a contract of charter party in which A promises to discharge the vessel "in 14 days." Usage in the shipping business may show this means 14 working days.

6. A and B enter into a contract for the purchase and sale of "No. 1 heavy book paper guaranteed free from ground wood." Usage in the paper trade may show that this means paper not containing over 3% ground wood.

c.  Local usages of trade.  Where usages vary from place to place, there may be a problem in deciding which usage is applicable. Even though local residents regularly contract with reference to a local usage of trade, others are not bound by the usage unless they know or have reason to know of it. If that condition is satisfied and no contrary intention is shown, a usage of trade in a particular place is ordinarily used to interpret the agreement as to that part of the performance which is to occur there. See Uniform Commercial Code § 1-205(5).

Illustrations:

7. A contracts to employ B for 20 days. In the kind of work to which the employment relates, in the place where both reside and the work is to be performed, a day's work is eight hours. Unless otherwise agreed, B's employment is for 20 eight-hour days.

8. A leases to B a portion of a building for "confectionery store purposes." By local usage at the time and place where the lease is made and the building is located, "confectionery store purposes" include the giving of light lunches. Unless otherwise agreed, the usage is part of the contract.

9. A promises B to keep certain premises "fully insured." At the time and place where the contract is made and to be performed and where the parties reside, insurance companies will not insure such premises for more than three-fourths of their value, and such premises insured for three-fourths of their value are called "fully insured." Unless otherwise agreed, the local usage is part of the contract.

10. A of Chicago negotiates and concludes in South Carolina an integrated contract to sell and deliver to B in South Carolina "ground sheep manure." These words mean a finer grinding in South Carolina than they do in Chicago, and A has reason to know of the South Carolina usage. Unless otherwise agreed, the contract is taken to refer to the South Carolina usage.

Former § 248 is here revised to follow Uniform Commercial Code § 1-205. See 5 Williston, Contracts §§ 648-62 (3d ed. 1961); 3 Corbin, Contracts §§ 555-57 (1960 & Supp. 1980); 9 Wigmore, Evidence §§ 2440, 2460-66 (3d ed. 1940).

Comment a.  On trade usage generally, see Lipschutz v. Gordon Jewelry Corp., 373 F. Supp. 375 (S.D. Tex. 1974).

Comment b.  That a trade usage need not be "universal" or "notorious," see Threadgill v. Peabody Coal Co., 34 Colo. App. 203, 526 P.2d 676 (1974), analogizing from Uniform Commercial Code § 1-205(2) and Comment 5. That people in a particular trade need not know specific customs if the customs are prominent, see Heggblade-Marguleas-Tenneco, Inc. v. Sunshine Biscuit, Inc., 59 Cal. App.3d 948, 131 Cal. Rptr. 183 (1976); Lambourne v. Manchester Cty. Props., 135 Vt. 178, 374 A.2d 122 (1977). But usage must be that of a given trade, and cannot be imposed from other businesses. Quad Constr., Inc. v. Wm. A. Smith Contr. Co., 534 F.2d 1391 (10th Cir. 1976). On the lack of a need to show ambiguity before trade usage may be shown, see Campbell v. Hostetter Farms, Inc., 251 Pa. Super. Ct. 232, 380 A.2d 463 (1977); Heggblade-Marguleas-Tenneco, Inc. v. Sunshine Biscuit, Inc., supra; Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3 (4th Cir. 1971); (all relying on Uniform Commercial Code § 2-202); compare C & A Constr. Co. v. Benning Constr. Co., 509 S.W.2d 302, 305 (Ark. 1974) (dissenting opinion); Della Ratta, Inc. v. American Better Comm. Devs., 38 Md. App. 119, 380 A.2d 627 (1977). Contra: Cable-Wiedemer, Inc. v. A. Friederick & Sons, 71 Misc.2d 443, 336 N.Y.S.2d 139 (County Ct. 1972). Illustrations 1-6 are based on Illustrations 2-7 to former § 246. See Hurst v. W.J. Lake & Co., 141 Or. 306, 16 P.2d 627 (1932); Emor, Inc. v. Cyprus Mines Corp., 467 F.2d 770 (3d Cir. 1972). See also Annot., 89 A.L.R. 1228 (1934).

Comment c.  Illustrations 7-9 are based on Illustrations 1, 2 and 4 to former § 248. Illustration 10 is based on Illustration 4 to former § 247; cf. Markey v. Brunson, 286 F. 893 (4th Cir. 1923).

ALR Annotations:

Requirements contracts under § 2-306(1) of Uniform Commercial Code. 96 A.L.R.3d 1275.
Validity and construction of "No Damage" Clause with respect to delay inbuilding or construction contract. 74 A.L.R.3d 187.
Validity, construction, and effect of clause in franchise contract prohibiting transfer of franchise or contract. 59 A.L.R.3d 244.
Validity and construction of restrictive covenant not to compete ancillary to franchise agreement. 50 A.L.R.3d 746.
Meaning of terms "city," "town," or the like as employed in restrictive covvenants not to compete. 45 A.L.R.3d 1339.
Construction and effect of affirmative provision in contract of sale by which purchaser agrees to take article "as is," in the condition in which it is, or equivalent term. 24 A.L.R.3d 465.
What 12-month period constitutes "year" or "calendar year" as used in public enactment, contract, or other written instrument. 5 A.L.R.3d 584.
Effect of stipulation, in private building or construction contract, that alterations or extras must be ordered in writing. 2 A.L.R.3d 620.
Effect of stipulation, in public building or construction contract, that alterations or extras must be ordered in writing. 1 A.L.R.3d 1173.
Conditions printed on confirmation slips as binding on customers of stock or commodity broker. 71 A.L.R.2d 1089.
Construction and effect of contract for sale of commodity or goods wherein quantity is described as "about" or "more or less" than an amount specified. 58 A.L.R.2d 377.
Effect of failure of contract for sale or exchange of real estate to specify time for giving of possession. 56 A.L.R.2d 1272.
Place, in absence of written provision in sales contract, where cash consideration for goods purchased is payable. 49 A.L.R.2d 1350.
Construction and effect of provision in private building and construction contract that work must be done to satisfaction of owner. 44 A.L.R.2d 1114.
Validity, construction, and effect of limited liability or stipulated damages clause in fire or burglar alarm service contract. 42 A.L.R.2d 591.
What constitutes "accounts receivable" under contract selling, assigning, pledging, or reserving such items. 41 A.L.R.2d 1395.
Contract by seller of business not to compete as affecting his lease of other property in restricted area to one who he knows will compete with purchaser. 14 A.L.R.2d 1333.
Validity, construction, and application of "no damage" clause with respect to delay in construction contract. 10 A.L.R.2d 801.
Meaning of term "radius" employed in contract, statute, or ordinance as descriptive of area, location, or distance. 10 A.L.R.2d 605.

Digest System Key Numbers:

Customs and Usages 1-8, 12