All posts tagged course of performance

Taking Aim: Lining Up the Case

As noted in the last blog, the drafters of the Uniform Commercial Code were very specific in their directions to the courts regarding the manner in which the UCC is to be interpreted:

The Uniform Commercial Code must be liberally construed and applied to promote its underlying purposes and policies…. Section 1-103(a).

The underlying purposes and policies of the Code are stated in Sections 1-103 (a)(1)(2)(3) as follows:

(1)   to simplify, clarify, and modernize the law governing commercial transactions;

(2)   to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and

(3)   to make uniform the law among the various jurisdictions.

As an attorney and legal consultant, I have found the strategies utilized to implement these purposes and policies to be the most enjoyable component in the analytical process, in that it provides a limitless opportunity for creativity to achieve the desired result.  There are four steps involved in the process:

  1. Delineating the facts;
  2. Application of the facts to the relevant substantive provisions involved;
  3. Isolating the key provisions upon which the case will most likely be determined;
  4. Identifying a purpose or policy which supports the interpretation being advocated.

The first component is critical.  There are two basic directions that this portion of the case can take.  First, there may be two distinct versions of the facts, each of which will support a verdict if proven to be true.  Second, there may be no dispute as to the critical facts, in which case the result will depend on the interpretation of the law as applied to the facts.

In the second stage, the statute comes to life.  The UCC is, in many instances, a distillation of commercial fact patterns which have repeated themselves over time, in many cases, over hundreds of years.  A given section may contain many independent rules, which may or may not be activated when the facts are superimposed on the relevant statutory provision.  Once the applicable portions of the statute have been activated, the advocate is placed in the position of creating the arguments which will carry his or her side to victory.

The question then becomes: which of the purposes or policies can be utilized to guide the court to the desired result?  This is where the great art of advocacy comes into play.  The skilled advocate will be able to use the facts of his or her case, line it up with a particular policy, and demonstrate to the court why the result being advocated will support the policy being activated.

Once the appropriate policy is identified, the advocate directs the court’s attention the mandate of ‘liberal construction and application of the Uniform Commercial Code’ to support the policy identified, and why, in the case under consideration, the result so advocated precisely accomplishes that goal.

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by learntheucc on December 17, 2011  •  Permalink
Posted in Article 1 - General Provisions, Learn the UCC
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Posted by learntheucc on December 17, 2011

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The Contract After the Agreement.

The recent sequence of Blogs began with one of the most fundamental, pervasive and important cornerstones of the Uniform Commercial Code: What is the contract between the parties? Our analysis began with section 1-201(b)(12) which states the basic definition of a “contract” under the Uniform Commercial Code:

“Contract”…means the total legal obligation that results from the parties agreement as determined by [the Uniform Commercial Code] as supplemented by any other applicable rules of law.  Section 1-201(b)(12)

The past three Blogs have focused on the first element: the parties agreement:  defined as:

…[T]he bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1-303.

The importance and potential impact ‘of  language, course of performance, and usage of trade’ have been demonstrated. Reported cases overwhelmingly support the importance of these concepts.  It must be remembered however, that these are listed as examples of ‘inferences from other circumstances’ are thus illustrative, not exclusive.  To the extent a favorable ‘inference’ can be made from ‘other circumstances’, the advocate has a vehicle to introduce evidence which can establish that result.

The basics of ‘agreement’ are now in place.  However, it is clear from a reading of Section 1-201(b)(12), that this is only one of three elements which must be looked at in determining what the ‘contract’ is:

The other two involve:

  1. The application of the laws of the Uniform Commercial Code to the ‘agreement’;
  2. Supplemental rules of law which may be applicable.

As will be seen in subsequent entries, both of the foregoing can have extraordinary and far reaching impact on what the end result of the ‘agreement’ is in reality.  The potential for favorable drafting of contracts, timely intermediate actions, and creative strategies for litigation will be interwoven into these discussions.

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by learntheucc on November 13, 2011  •  Permalink
Posted in Article 1 - General Provisions, Learn the UCC, Twitter
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Posted by learntheucc on November 13, 2011

https://learntheucc.wordpress.com/2011/11/13/the-contract-after-the-agreement/

“Course of Dealing”: Impact

This is third post dealing with one of the most critical and fundamental issues of the Uniform Commercial Code: The agreement of the parties. The first element was the language used by the parties involved; second, is ascertaining if there is a course of performance, a certain type of behavior between the parties to a particular transaction which sheds light on the actual meaning of the agreement. 

One of the three remaining elements to the definition of agreement is course of dealing:

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 for interpreting their expressions and other conduct.  Section 1-303(b)

In approaching Section 1-303(b), and Code sections in general, it is important to remember that any given Code section can have up to seven or eight rules or qualifiers.  Every word is important.   A careful look at Section 1-303(b) reveals a number of avenues through which various words can be utilized or attacked.

The conduct which gives rise to a course of performance must:

  1. Be a sequence of conduct;
  2. The conduct must involve transactions which occurred before the particular  transaction;
  3. Conduct must “fairly regarded” as a common basis for interpreting their expressions and other conduct.

Section 1-303(b) makes good sense as it incorporates the realities which attend a history of knowing someone into a particular transaction.

All of the elements are important; however, one bears direct comment and examination.  This arises in connection with the requirement that a course of dealing requires “previous transactions” between parties.  It is clear that conduct which occurs between parties in past business dealings is relevant in understanding what the parties mean in a current transaction and is within the definition of course of dealing.

I think it is also important to integrate non transactional interactions between parties when these relationships give rise to the basis of understanding referred to in the section.  Certainly, one can learn a great deal about someone from knowing them outside a direct transactional basis, and to the extent this sheds light on what the parties meant in a particular transaction, I believe it should be incorporated into ascertaining what the agreement is.

With language, course of performance, and course of dealing having been discussed, the next blog will focus on the final two elements of ‘agreement: usage of trade and inferences from other circumstances.

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by learntheucc on October 31, 2011  •  Permalink
Posted in Article 1 - General Provisions, Article 2 - Sales transactions, Learn the UCC
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Posted by learntheucc on October 31, 2011

https://learntheucc.wordpress.com/2011/10/31/%e2%80%9ccourse-of-dealing%e2%80%9d-impact/

“Course of Performance”: Impact on Contract

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 8th, 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 8th, 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 8th of the month.

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by learntheucc on October 20, 2011  •  Permalink
Posted in Article 1 - General Provisions, Article 2 - Sales transactions, Learn the UCC, Twitter
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Posted by learntheucc on October 20, 2011

https://learntheucc.wordpress.com/2011/10/20/%e2%80%9ccourse-of-performance%e2%80%9d-impact-on-contract/