This chapter turns to evidence outside the text, especially the parties’ conduct and the commercial practices that give language shared meaning. The reflective perspective of Galadriel’s Mirror nicely captures how outside context can clarify what a contract was understood to say.
Doctrinal map
When intrinsic evidence cannot resolve ambiguity, the chapter examines what comes from outside the document. Course of performance, course of dealing, and usage of trade carry interpretive weight under UCC § 1-303. Nanakuli Paving v. Shell Oil — the asphalt-paving ‘price protection’ usage — is the classic illustration. Wood v. Lucy, Lady Duff-Gordon shows Cardozo’s willingness to imply terms (best-efforts) from the structure of the deal to save the contract from being illusory.
Key Sources
Key Rules
- R2d § 202(5): Course of performance, course of dealing, usage of trade
- UCC § 1-303: Hierarchy of extrinsic evidence
Cases
- Wood v. Lucy, Lady Duff-Gordon 222 N.Y. 88, 118 N.E. 214 (1917) An exclusive agency agreement carries an implied promise by the agent to use reasonable efforts to bring profits and revenues into existence. The whole writing may be instinct with an obligation, imperfectly expressed, sufficient to support a contract.
- Nanakuli Paving & Rock Co. v. Shell Oil Co. 664 F.2d 772 (9th Cir. 1981) Under the UCC, trade usage and course of performance may be used to explain or supplement express terms unless the express terms cannot reasonably be construed to be consistent with them. A trade practice of 'price protection' may inform a posted-price contract for asphalt.