Course of dealing: Overview, definition, and example
What is course of dealing?
Course of dealing refers to the pattern of conduct or previous transactions between two parties that can be used to interpret the meaning or intent of terms in a current agreement or contract. It reflects the way the parties have interacted or conducted business in the past and can help establish expectations for how they will act or perform in the future. In legal terms, the course of dealing may be used to clarify ambiguous contract provisions or demonstrate how certain terms have been interpreted by both parties in prior interactions.
For example, if a supplier consistently provides goods to a retailer with a certain delivery schedule, the previous course of dealing can be referenced to understand expectations for future deliveries under the same contract.
Why is course of dealing important?
Course of dealing is important because it helps interpret the intentions of the parties involved in a contract or transaction. It provides a history that can clarify how the parties have understood and acted on certain terms in the past. This can help resolve disputes or ambiguities in the current contract, providing insight into how certain provisions should be applied based on prior interactions.
For businesses, relying on course of dealing helps avoid misunderstandings and conflicts by providing a common understanding of how business will be conducted. For individuals, it ensures that prior agreements and actions are considered in the context of the current relationship, reducing confusion or miscommunication.
Understanding course of dealing through an example
Imagine a wholesaler and a retailer have been doing business for several years. In every prior transaction, the wholesaler has delivered goods to the retailer within 10 days of an order being placed. However, in a new contract, the delivery timeline is stated as "within a reasonable time," which seems unclear. The retailer can reference their course of dealing to argue that, based on past transactions, a 10-day delivery time is the standard. This history helps establish that both parties have always operated with this timeline, providing clarity in the new agreement.
In another example, a business regularly buys software licenses from a supplier, and the supplier has always allowed the business to pay 30 days after receiving the software. If a new agreement is formed and payment terms are not clearly stated, the business may rely on the course of dealing to argue that a 30-day payment window is the expected practice.
Example of course of dealing clause
Here’s how a course of dealing clause might look in a contract:
“The parties acknowledge that the course of dealing between them in prior transactions has established the following practices: Delivery of goods shall be deemed to occur within 10 days from the date of the order, unless otherwise specified in writing. These practices shall govern this Agreement unless explicitly altered by the parties.”
Conclusion
Course of dealing refers to the history of past interactions between two parties, used to interpret or clarify terms in a current contract. It helps establish a common understanding of expectations and can prevent misunderstandings or disputes. By looking at how the parties have acted in previous transactions, both businesses and individuals can ensure that future dealings proceed smoothly and in line with established practices.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.