Legal Definitions - Usage of trade

Usage of trade refers to a common and well-established practice or way of doing business within a specific industry, profession, or geographic area. These practices are so regularly followed that parties involved in a transaction within that context can reasonably expect them to be part of their agreement, even if not explicitly written down. Courts often consider these customary practices when interpreting contracts, especially when the contract's terms are unclear or incomplete, to understand the true intentions and expectations of the parties.

Here are some examples illustrating the concept of usage of trade:

• Example 1: The Construction Industry

  A general contractor hires a plumbing subcontractor for a new commercial building project. Their contract states that the plumbing work must be completed in a "workmanlike manner." While the contract doesn't define "workmanlike manner" in detail, the local construction industry has a long-standing practice where this term implies adherence to specific building codes, industry standards for pipe fitting, and a clean, organized installation site. Both the general contractor and the subcontractor, being part of this industry, would understand and expect these unwritten standards to apply.

  This illustrates usage of trade because the shared, regular practice within the local construction industry defines a term that might otherwise be ambiguous, creating a justified expectation for both parties regarding the quality of work.

• Example 2: Agricultural Produce Sales

  A restaurant chain places an order with a produce distributor for "Grade A organic romaine lettuce." The written purchase order doesn't specify the exact dimensions, color, or shelf life. However, within the regional agricultural and restaurant supply industry, "Grade A organic romaine lettuce" is consistently understood to mean heads of lettuce that are at least 10-12 inches long, vibrant green, free from blemishes, and harvested within 48 hours of delivery, ensuring a minimum shelf life of 7 days for the restaurant.

  This demonstrates usage of trade because the regular observance of these quality standards within the produce industry creates a clear expectation for both the buyer and seller, even without explicit contractual language.

• Example 3: Wholesale Apparel Transactions

  A small boutique orders a large quantity of designer handbags from a wholesale supplier. The invoice states "payment terms: net 60." In the wholesale apparel industry, it is a widely recognized and regularly observed practice that "net 60" means the buyer has 60 days from the invoice date to pay the full amount. Furthermore, it is also a common, though sometimes unwritten, practice in this specific trade that if the buyer pays within 10 days, they receive a 2% discount (often expressed as "2/10, net 60"). Even if the 2% discount isn't explicitly printed on every invoice, both parties, operating within this trade, would understand and expect this potential discount opportunity.

  This example shows usage of trade because the consistent application of these payment terms and discount structures within the wholesale apparel industry establishes a customary practice that influences the parties' expectations and the interpretation of their agreement.