Extrinsic Evidence

The canons keep the dispute inside the writing. But contracts are made by people who deal with each other and operate in a trade, and the words on the page often mean less than what the parties actually did and what the industry takes for granted. Extrinsic evidence is the information from outside the writing that courts admit to clarify an ambiguous term or to supplement a contract’s gaps. It does two jobs — clarifying ambiguity and filling in missing terms — and the UCC organizes it into a ranked hierarchy.

The UCC § 1-303 hierarchy

UCC § 1-303. Three sources of meaning, in order of persuasiveness:

• Course of performance — how the parties have actually behaved under this contract; the most persuasive because it shows what they themselves understood the deal to mean. (Repeated conduct, not a one-off.)
• Course of dealing — how the parties conducted prior contracts with each other.
• Trade usage — practices so regularly observed in a place, vocation, or trade that the parties are taken to have contracted against them.

All three supplement express terms; none overrides an express term unless the two cannot reasonably be read together. R2d § 202 carries the same idea into the common law, directing courts to read the agreement in light of the parties’ conduct and the commercial context. The framing question the cases keep returning to is the old Williston–Corbin divide: does a court look past the writing only when the term is ambiguous on its face, or does it consider context first to decide whether ambiguity exists at all? The UCC tilts toward the contextualist (Corbin) side.

Cases

Nānākuli Paving & Rock Co. v. Shell Oil Co. is the anchor. The contract set price at “Shell’s posted price at time of delivery,” but the Hawaii asphalt-paving trade universally practiced “price protection” — honoring the old price on tonnage already committed when prices rose. Shell had price-protected Nānākuli twice before. The Ninth Circuit held that trade usage and course of performance could supplement the express price term because price protection, applying only at price increases and only to committed work, formed an exception to rather than a total negation of “posted price.” It matters because it shows extrinsic evidence reaching its furthest: usage and conduct reshaping what looks like a fixed price term.

Wood v. Lucy, Lady Duff-Gordon is the companion. Lucy gave Wood the exclusive right to market her endorsements; she then placed endorsements herself and withheld the profits, arguing Wood had promised nothing and so gave no consideration. Cardozo held the whole writing was “instinct with an obligation, imperfectly expressed” — an exclusive agency carries an implied promise to use reasonable efforts. It matters because it shows the same contextual instinct at common law: courts read a writing in light of its evident commercial purpose, supplying the term the parties plainly assumed.

What you should be able to do

Rank course of performance, course of dealing, and trade usage under UCC § 1-303 and apply them to an exclusive-dealing or supply arrangement. Explain when extrinsic evidence is admissible to interpret or supplement a contract, and articulate the Williston–Corbin difference over whether context comes before or after a finding of ambiguity. Apply the relational-context reasoning of Wood to a literally illusory promise and decide whether usage or implied effort supplies the missing term. Next class draws the line: the parol evidence rule and the integration doctrine that decides what evidence gets in at all.