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LSDefine
Simple English definitions for legal terms
Ordinary course of business
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A quick definition of Ordinary course of business:
The ordinary course of business refers to the usual way a business operates within a certain period of time. This means that the business has followed past customs and practices, has not taken on any unusual liabilities, has engaged in normal activities for that type of business, and has followed industry standards. This term is often used in contracts for mergers and acquisitions and can include other elements that are considered customary for that particular business.
A more thorough explanation:
Definition: The ordinary course of business refers to the standard practices and activities that a business engages in on a regular basis. This includes:
- Conducting business in a consistent manner with past commercial customs and practices
- Not incurring any liabilities outside of day-to-day operations
- Engaging in activities that are considered normal for that specific business
- Adhering to industry practices
This term is often used in merger and acquisition contracts to determine whether a business is operating normally and to identify any potential risks or liabilities. The ordinary course of business may include one or more of the above elements or any other practices that are considered customary for that particular business.
For example, a restaurant's ordinary course of business would include activities such as preparing and serving food, managing inventory, and paying employees. However, if the restaurant suddenly started selling cars or investing in real estate, these activities would be considered outside the ordinary course of business and could raise concerns for potential buyers or investors.