The “contract”, or “total legal obligation” between the parties, as defined in Section 1-201(b) (12) is comprised of three elements:

1. The parties’ agreement;
2.  The laws of the Uniform Commercial Code;
3. Other applicable rules of law.

Each of these three variables can have an enormous impact on a sale of goods contract, and any other transaction which occurs under the Uniform Commercial Code.

      1.      The parties’ agreement;

Per section 1-201(b)(3) the parties’ agreement consists of five elements:

1. Language;
2. Course of Performance;
3. Course of Dealing;
4. Usage of Trade;
5. Inference from Other Circumstances

Language within the purview of Section 1-201(b)(3) may be written or oral.  While there may be parol evidence issues, the “agreement” is being determined here.  Parol evidence and other laws may affect what the agreement is as a legal reality, but at this stage of the process we are considering all written language and any purported verbal discussions.

      2.      C ourse of Performance

Even if there is a written contract with terms clearly stated, the “course of performance” between parties to an agreement, can dramatically alter the ultimate meaning of the words used.

(a)   A “course of performance” is 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 performance or acquiesces in it without objection.

Patterns of behavior which exist under a “course of performance” may become part of the agreement.  Assume for a moment that Buyer and Seller had a contract whereby Seller was to deliver 40 car loads of tomatoes on the third day of each month.  Further assume that during the first two years of the contract, delivery was made on the 8^th, and that Buyer never objected to that date.  Finally, assume that the price of tomatoes dropped by fifty per cent and Buyer purchased  40 carloads in the open market since the deal was “too good to pass on”.

When the forty carloads from the original Seller show up on the 8^th, Buyer rejects the tender stating “they were not delivered in accordance with the terms of the contract. Delivery was due on the third”.

I believe that the “course of performance” between the parties for the two years in question, resulted in effectively changing the delivery date to the 8^th of the month.

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