One of my most challenging law school professors regularly asked my class to interpret various agreements as a part of our contracts course. Some of the agreements that we were asked to analyze were barely recognizable as contracts.
For example, one person can agree to purchase a tool from another person. Those two people can have a written contract that states that one person was buying the tool from the other person. However, that sentence might literally be all that is included in the written contract.
There are serious challenges with a situation like this. How much is to be paid for the tool? Must cash be paid, or is a check acceptable? And, when is possession of the tool to be transferred from the seller to the buyer? The omission of many, important terms can sometimes make a contract unenforceable as a whole, but not always.
Frequently, the law fills “gaps” in contracts with terms and conditions that are “reasonable.” Of course, what is reasonable is not always clear. Determining reasonableness is often analyzed by looking at three key circumstances and contexts.
First, what is the practice between the parties as to tool sales recently? For instance, if the buyer has been regularly buying tools from the seller for the last two years continuously and always has paid cash and received the tools upon payment, that is often considered “course of performance,” and course of performance can define what is reasonable.
If there is no course of performance, the second standard in determining reasonableness can be “course of dealing.” Course of dealing looks at the tradition or customary practices between the buyer and seller overall as to anything between the buyer and the seller.
Illustratively, course of dealing would analyze whether the buyer and seller have ever sold anything between each other, other than tools, as a part of a continuous relationship. If the buyer previously, inconsistently purchased inventory, food, supplies or other items from the seller in the past and always paid cash and received the purchased items upon payment, then that course of dealing may define what is reasonable.
If there is no course of performance or course of dealing, the third factor that can be looked at is what is “normal and customary” in the industry as a whole. Normal and customary is basically a reflection of what is typical among buyers and sellers in the relevant context in the community.
For instance, if buyers and sellers of tools in the community are typically paid by cashier’s check 30 days after placing a tool order with possession transferred at the time of ordering, then that may constitute the normal and customary practice.
Sometimes, establishing what is normal and customary uses expert testimony, and other times it can be defined by surveys or other contracts. For instance, normal and customary farm crop combining rates are usually published annually by Ohio State, which helps to define normal and customary harvesting rates for farmers and custom harvesters this time of year.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.