Course of Dealing and Usage of Trade
This article provides an overview of course of dealing and usage of trade under Missouri’s Uniform Commercial Code (“UCC”). This article also introduces other key concepts under the UCC.
Chapter 400 of the Missouri Revised Statutes is known as the “Uniform Commercial Code”. Missouri enacted the UCC in 1963. Although most of the states have enacted the UCC, most of the states have adopted only a portion of the UCC or modified parts of it. The courts of the various states have also interpreted the UCC differently. As such, the laws governing commercial transactions still varies by state. Nonetheless, the UCC probably still provides greater uniformity among the states than did their common law alone.
I have litigated numerous contract cases since 2005. The UCC is often complex. This is one of several articles designed to provide an overview of Missouri’s UCC. The UCC generally encompasses nine areas of commercial transactions: sales, leases, negotiable instruments, bank deposits and collections, funds transfers, letters of credit, documents of title, investment securities, and secured transactions. This article is the second of a two-part introduction to Missouri’s Uniform Commercial Code. Subsequent articles will discuss each of the nine areas of Missouri’s Uniform Commercial Code.
Course of Dealing and Usage of Trade
Missouri’s Uniform Commercial Code defines “course of dealing” as a sequence of previous conduct between the parties to a particular type of transaction. Such previous conduct can form a basis for understanding an individual transaction. The UCC defines “usage of trade” as any regular practice or method in a trade or vocation that creates an expectation that such will apply to a particular transaction. Usage of trade can be evidenced, for example, by a written trade code, or other writing. The UCC charges the court with interpreting such writings. Course of dealing and usage of trade can provide meaning to, supplement, or qualify the terms of an agreement.
When possible, the terms of an agreement, course of dealing and usage of trade should be construed as consistent with each other. However, the terms of the agreement control course of dealing and usage of trade when such application is unreasonable. Course of dealing controls as between course of dealing and usage of trade. Also, usage of trade in a particular place shall be used in interpreting an agreement. Evidence of usage of trade is inadmissible in court if the evidence unfairly surprises the other party. Therefore, a party intending to introduce such evidence into the court record should first notify the other party of the intent.
The formation of a contract does not require all of its terms to be settled. However, the parties must have intended to form an agreement. This is true in a sale of goods under the UCC. For example, usage of trade for a particular place can determine the price of delivered goods.
Statute of Frauds
Under Missouri’s Uniform Commercial Code, a contract for a sale of personal property greater than $5,000.00 must be in writing and signed. It must also identify the price and the property. However, this does not apply to goods, securities, or security agreements. The UCC defines “goods” as all things movable, except money and securities. Goods also includes unborn animals, crops, and other things that can be severed from real estate. “Future goods” are defined as not identified and existing at the time of the contract.
Reservation of Rights
A party to an agreement may, under a reservation of rights, perform the agreement pursuant to the demands of another party to the agreement. A party performing an agreement under a reservation of rights will not prejudice the rights reserved if the reservation is explicit. Words such as “without prejudice”, “under protest”, “under reserve”, “with reservation of all our rights” or similar language is sufficient to preserve the rights so reserved. However, a reservation of rights will not apply to an accord and satisfaction. An accord and satisfaction is a contract for the settlement of a disputed claim. Accord and satisfaction usually occurs when the debtor tenders a check for less than the amount owed. The debtor typically writes on the check that acceptance of the check is satisfaction of the full debt. Under the UCC, the creditor cannot cash the check under a reservation of rights.
Option to Accelerate at Will
An agreement might permit one party to accelerate the payment or performance owed by another party. An agreement might also permit a party to later demand collateral “at will”, “when he deems himself insecure”. However, such rights must be exercised in good faith. The party against whom the power is exercised has the burden of proving lack of good faith.
Michael Sewell has successfully litigated more than 100 lawsuits since 2005, in federal, state and municipal courts. Sewell Law provides professional litigation services in the areas of breach of contract, commercial transactions, general business matters, real estate, torts, and more.
This article is for general informational purposes only. This information is not intended as legal advice. You should consult an attorney regarding how this information might apply to your specific circumstances.
Contact Michael Sewell for an initial consultation at no charge. (314) 942-3232; michael@sewelllaw.net.
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