Course of performance

Definition

Course of performance refers to the conduct and actions taken by parties to a contract regarding their ongoing performance under the agreement. This term plays a significant role in contract interpretation, as it provides insight into how the parties have acted in relation to the contract over time, which can help clarify ambiguous terms and intentions.

5 Must Know Facts For Your Next Test

1. Course of performance can clarify vague or ambiguous terms by showing how the parties have interpreted those terms during their ongoing dealings.
2. In cases where the parties have a history of prior dealings, this history can be used alongside course of performance to establish expectations and intentions.
3. If one party's actions demonstrate an understanding of the contract different from its written terms, course of performance may be used to argue for that understanding in legal disputes.
4. Courts often give weight to course of performance when evaluating disputes because it reflects the actual behavior and intentions of the parties involved.
5. This concept is particularly important in contracts that involve ongoing duties or repeated transactions, as it helps to create consistency and predictability in how obligations are fulfilled.

Review Questions

• How does course of performance aid in interpreting ambiguous terms within a contract?
  • Course of performance aids in interpreting ambiguous terms by providing evidence of how the parties have acted under the contract in practice. When the written words of a contract are unclear, examining the conduct and actions of both parties can reveal their mutual understanding and intentions. Courts often look at these actions to determine what both parties reasonably believed their obligations were, which helps clarify any confusion surrounding specific contractual terms.
• What is the relationship between course of performance and course of dealing in contract interpretation?
  • Course of performance and course of dealing are closely related concepts that work together in contract interpretation. Course of performance focuses on how parties have performed their ongoing obligations under a specific contract, while course of dealing looks at past transactions between the same parties. When courts assess a dispute, they may consider both elements to establish a clearer understanding of expectations and intentions, using past conduct to inform present obligations.
• Evaluate the implications of using course of performance in legal disputes regarding contract enforcement and compliance.
  • Using course of performance in legal disputes has significant implications for contract enforcement and compliance. It allows courts to consider real-world behaviors over strict interpretations of written terms, which can lead to fairer outcomes based on actual practices rather than rigid adherence to text. This approach acknowledges that contracts often evolve through practice, making it easier for parties to hold each other accountable based on established patterns rather than merely on initial agreements. Additionally, this can foster more collaborative relationships as parties understand that their ongoing actions will inform legal interpretations.

Related terms

Contract interpretation: The process of determining the meaning and implications of the terms and conditions of a contract, often involving the examination of language, context, and intent.

Course of dealing:

A sequence of previous transactions between the same parties that may inform their current contractual relationship and how they interpret obligations.

Usage of trade: The customary practices and norms that prevail in a particular industry, which can influence how terms are interpreted within contracts.