The phrase “course of performance” refers to a sequence of conduct between the parties to a particular transaction that exists if: (1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and (2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.33.1

The phrase “usage of trade” signifies a 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.34 To be a “usage of trade” the practice must be regularly followed in the trade, but it need not be universal throughout the trade. Nor must both parties be consciously aware of the usage.35

A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.36

A course of performance or course of dealing between the parties or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement.37

The express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable: (1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; and (3) course of dealing prevails over usage of trade.38

Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.39

Where the terms of a contract are clear and unambiguous, however, such terms will control over custom, usage and course of dealing.40 When the terms of the contract are ambiguous, evidence of custom, usage of trade and course of dealing will be admissible, provided that the offering party has given the adverse party such notice as the court finds sufficient to prevent unfair surprise.40

Evidence of custom or usage can be rebutted by evidence indicating the parties’ understanding that the custom or usage would not be followed.41

Evidence of custom may also have relevance in non-contract actions. For example, in negligence actions, evidence of custom is admissible to show what a reasonable person would do in a given set of circumstances, although such evidence is not deemed to be controlling.42

Evidence of custom and usage of trade is ordinarily supplied by expert witnesses, usually persons with extensive experience in the business. In non-contract actions, the qualification of an expert whose testimony would establish the custom or usage of trade would be likely to be more technically related and would have to be tailored to a narrower focus.

33.1. 6 Del. C. § 1-303(a).

34. 6 Del. C. § 1-303(c). See also Wilmington C. R. Co. v. White, 66 A. 1009, 1012 (Del. 1907).

35. Freudenberg Spunweb Co. v. Fibervisions, L.P., C.A. No. 04C-03-073-FSS, slip op. at 43-44, Silverman, J. (Del. Super. Feb, 27, 2006), aff’d mem., 909 A.2d 594 (Del. 2006).

36. 6 Del. C. § 1-303(b).

37. 6 Del. C. § 1-303(d).

38. 6 Del. C. § 1-303(e).

39. 6 Del. C. § 1-303(g).

40. 6 Del. C. §§ 1-205(4), 2-208(2). See also Gunnip v. Lautenklos, 94 A.2d 712, 717 (Del. Ch. 1953); Kenyon v. Millard, 104 A. 778, 779 (Del. Ch. 1918); Colvocoresses v. W. S. Wasserman Co., 196 A. 181, 184 (Del. Super. 1938).

41. Bryan v. Brown, 53 A. 55, 56 (Del. Ch. 1902).

42. See Delmarva Power & Light v. Stout, 380 A.2d 1365, 1367 (Del. 1977).

© 2010  David L. Finger