Under Section 2-202 of the UCC, a course of dealing, a usage of trade, or a course of performance can be introduced as evidence to explain or supplement any written contract for the sale of goods. A course of dealing is defined as “a sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.” A usage of trade is “any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question.” A course of performance is the conduct of a party in response to a contract that calls for repeated action (e.g., a purchase agreement for a factory’s monthly output, or an undertaking to wash a neighbor’s car weekly).
KEY TAKEAWAY
The parol evidence rule is intended to preserve “the four corners” of the contract: it generally prohibits the introduction of contemporaneous oral or written elements of negotiation that did not get included in the written contract, subject to a number of exemptions.
The UCC allows evidence of course of dealing, course of performance, or usage of trade to give meaning to the contract.
EXERCISES
- What is the purpose of the parol evidence rule?
- How does it operate to crystallize the intention of the contracting parties?
- To what kinds of contract issues does the rule not apply?
- What “help” does the UCC give to fleshing out the parties’ contractual understanding?
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