Restat 2d of Contracts, § 223

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

(1)  A course of dealing is a sequence of previous conduct between the parties to an agreement which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
(2)  Unless otherwise agreed, a course of dealing between the parties 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 conflict between course of dealing and express terms, course of performance or usage of trade, see § 203.

b.  Common basis of understanding.  Course of dealing may become part of an agreement either by explicit provision or by tacit recognition, or it may guide the court in supplying an omitted term. Like usage of trade, it may determine the meaning of language or it may annex an agreed but unstated term. There is no requirement that an agreement be ambiguous before evidence of a course of dealing can be shown, nor is it required that the course of dealing be consistent with the meaning the agreement would have apart from the course of dealing.

Illustrations:

1. A, a sugar company, enters into a written agreement with B, a grower of sugar beets, by which B agrees to raise and deliver and A to purchase specified quantities of beets during the coming season. No price is fixed. The agreement is on a standard form used for B and many other growers in prior years. A's practice is to pay all growers uniformly on a formula based on A's "net return" according to A's established accounting system. Unless otherwise agreed, the established pattern of pricing is part of the agreement.

2. A, a manufacturer, sends a price quotation on goods to B, a dealer, together with printed "conditions of sale." B then sends orders to A; and A fills them. B takes advantage of discount terms of the quotation not referred to in B's orders. Unless otherwise agreed, the "conditions of sale" are part of each contract.

This is a new Section following Uniform Commercial Code § 1-205 (1) and (3). See 5 Williston, Contracts § 660 (3d ed. 1961); 3 Corbin, Contracts §§ 555-56 (1960 & Supp. 1980); 9 Wigmore, Evidence § 2465 (3d ed. 1940).

Comment b.  Illustration 1 is based on California Lettuce Growers, Inc. v. Union Sugar Co., 45 Cal.2d 474, 289 P.2d 785 (1955); see Amerine Nat'l Corp. v. Denver Feed Co., 493 F.2d 1275 (10th Cir. 1974). Illustration 2 is based on D'Orsay Equip. Co. v. United States Rubber Co., 302 F.2d 777 (1st Cir. 1962).

ALR Annotations:

Requirements contracts under § 2-306(1) of Uniform Commercial Code. 96 A.L.R.3d 1275.
Construction and effect of tenure provisions of contract or statute governing employment of college or university faculty member. 66 A.L.R.3d 1018.
Validity, construction, and effect of clause in franchise contract prohibiting transfer of franchise or contract. 59 A.L.R.3d 244.
Construction and operation of "optional agreement-flat payment" land contract under which optionee has right to take title when periodic payments (otherwise to be treated as rent) equal agreed price. 55 A.L.R.3d 159.
Validity, construction, and effect of real-estate brokers' multiple-listing agreement. 45 A.L.R.3d 190.
Construction of provision in real-estate mortgage, land contract, or other security instrument for release of separate parcels of land as payments are made. 41 A.L.R.3d 7.
Validity, construction, and enforcement of business opportunities or "Finder's Fee" contract. 24 A.L.R.3d 1160.
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.
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.
Construction and effect of provision in contract for sale of realty by which purchaser agrees to take property "as is" or in the condition in which it is. 97 A.L.R.2d 849.
Implied obligation of purchaser or lessee to conduct search for, or to develop or work premises for, minerals other than oil and gas. 76 A.L.R.2d 721.
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.
Place, in absence of written provision in sales contract, where cash consideration for goods purchased is payable. 49 A.L.R.2d 1350.
What constitutes "accounts receivable" under contract selling, assigning, pledging, or reserving such items. 41 A.L.R.2d 1395.
Validity, construction, and application of "no damage" clause with respect to delay in construction contract. 10 A.L.R.2d 801.

Digest System Key Numbers:

Contracts 170