| The "course of performance" is that set of circumstances surrounding the specific contract entered into between the parties. It includes how the parties interact with each other with respect to the particular contract at issue as well as how they conduct themselves in the execution of their respective duties under that contract and respond to the actions undertaken by each other. Generally, if one party fails to object and acquiesces in the course of performance undertaken by the other party, such actions can be used in the interpretation of the parties' contract.
An example showing the impact of the parties' course of performance can be seen in the construction contract between an owner and general contractor, which provides that time is of the essence in completion of the project. A court determining whether the general contractor acted in accordance with this time provision may consult the parties' course of performance over the life of the contract. If, for example, every phase of the project was completed thirty days after the projected completion date, with no objection by the owner who for all intents and purposes had acquiesced in the construction timeline, a court would likely find that the parties' course of performance indicated that a thirty-day window after the projected completion date was in keeping with the parties' meaning of "time is of the essence."
Where possible, courts attempt to harmonize the parties' course of performance, course of dealing, and trade usage with the contract's own express terms. However, when this cannot reasonably be accomplished, the contract's express terms will prevail. Following that, the parties' course of performance will hold greater weight over the course of dealing and trade usage. Copyright 2010 LexisNexis, a division of Reed Elsevier Inc. |