Course of Dealing
A sequence of prior conduct between parties to a contract that establishes a common basis for interpreting their current agreement.
While straightforward in theory, many businesses fail to actively track obligations tied to this concept - often resulting in missed deadlines, unintended renewals, penalties, or loss of contractual rights.
US Law · For business owners and foundersWhat is a Course of Dealing?
Course of dealing refers to a sequence of previous conduct between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct in the current transaction. Under UCC § 1-303, it is a recognized tool for contract interpretation.
Course of dealing looks backward to prior transactions between the same parties. Course of performance looks at how the parties have conducted themselves under the current contract. Usage of trade refers to practices that are so common in a trade or industry that the parties may be assumed to be aware of them. All three can be used to supplement or qualify contract terms.
Under UCC § 1-303(e), express terms of a contract control over course of performance, course of performance controls over course of dealing, and course of dealing controls over usage of trade. Courts use course of dealing to fill gaps and resolve ambiguity, but generally not to contradict clear express terms.
In practice, many teams rely on a contract expiry tracking system to stay on top of dates and obligations tied to clauses like this.
Key Elements
Prior Transactions
Must involve prior conduct between the same contracting parties - not third parties or industry practice generally.Established Understanding
The prior conduct must be sufficient to show a shared basis of understanding that the parties brought to the current agreement.Supplementing, Not Contradicting
Course of dealing can add to or explain contract terms, but courts are reluctant to use it to override unambiguous express language.Written Record
Emails, invoices, prior contracts, and payment records documenting past dealings are evidence that courts examine.Real-World Example
A buyer and supplier have done business for three years. In every prior purchase order, the supplier allowed 45-day payment terms even though the written contract said "net 30." The buyer now pays invoice #47 in 45 days and the supplier sues for late payment.
The buyer can argue course of dealing - the consistent prior practice of accepting 45-day payment effectively modified or interpreted the "net 30" term. A court may find the parties had a common understanding that 45-day payment was acceptable, defeating the breach claim.
This is why many businesses adopt automated deadline tracking to ensure no critical dates are missed before they pass.
Sample Clause Language
Course of Dealing Disclaimer ClauseWatch Out For
Inconsistent enforcement can modify your contract
If you repeatedly overlook a contract requirement (like late payments, non-conforming deliveries, or missed milestones), courts may find you have effectively waived that requirement through course of dealing.Include anti-waiver and integration clauses
To prevent course-of-dealing arguments, include a clause expressly stating that prior dealings do not modify the current contract and that waivers must be in writing.Don't let course of dealing deadlines catch you off guard
Key dates tied to course of dealings - renewal windows, expiry cutoffs, notice periods - can easily slip through the cracks when tracked manually. Missing them triggers automatic extensions, penalties, or lost rights. ExpiryEdge tracks every critical deadline and sends automated reminders before they're due - so nothing slips.
Instead of relying on spreadsheets or manual follow-ups, a centralized renewal reminder system ensures every deadline is visible, tracked, and actioned automatically.
How to Use This in Your Favor
Document every deviation from contract terms in writing
If you agree to a one-time exception (e.g., extended payment), put it in writing as a one-time accommodation. This prevents the exception from hardening into a course of dealing.Audit your contract compliance practices
Regularly review whether your team is consistently enforcing contract terms. Systematic non-enforcement creates course-of-dealing risk.Frequently Asked Questions
Can course of dealing override a written contract?
Generally, no - clear express terms control. But where contract terms are ambiguous, course of dealing can fill the gap or tip the interpretation. Some courts also use it to find implied modifications or waivers of loosely enforced terms.
Does course of dealing apply to one-time contracts?
No. Course of dealing by definition requires prior transactions between the same parties. A first-time contract cannot have an established course of dealing.