Bar Exam (Next Generation) Quiz: Usage Course Of Dealing And Course Of Performance Under The Ucc
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Usage Course Of Dealing And Course Of Performance Under The UccQuestion 1 of 11

A lumberyard and a furniture maker had several prior contracts under which the term 'first-quality lumber' meant lumber with no knots larger than 1/4 inch. In the regional lumber trade, however, 'first-quality lumber' is generally understood to allow knots up to 1/2 inch. The parties' current contract is a one-page form that says 'first-quality lumber' but does not define it. The lumberyard then shipped lumber with 3/8-inch knots. The furniture maker rejected it as not first-quality.

Which legal issue is most significant in determining whether the shipment conformed?

Whether the regional usage of trade is a course of performance that binds the furniture maker.
Whether the parties' course of dealing or the regional usage of trade should define 'first-quality lumber' for the current contract.
Whether the current contract is unenforceable because the term 'first-quality lumber' is indefinite.
Whether the furniture maker's rejection of the shipment was a breach of the duty of good faith.
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Bar Exam (Next Generation) Quiz

Bar Exam (Next Generation) Quiz: Usage Course Of Dealing And Course Of Performance Under The Ucc

Practice Usage Course Of Dealing And Course Of Performance Under The Ucc in Bar Exam (Next Generation) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

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This quiz focuses on Usage Course Of Dealing And Course Of Performance Under The Ucc, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Next Generation).

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Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

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Question 1

A lumberyard and a furniture maker had several prior contracts under which the term 'first-quality lumber' meant lumber with no knots larger than 1/4 inch. In the regional lumber trade, however, 'first-quality lumber' is generally understood to allow knots up to 1/2 inch. The parties' current contract is a one-page form that says 'first-quality lumber' but does not define it. The lumberyard then shipped lumber with 3/8-inch knots. The furniture maker rejected it as not first-quality.

Which legal issue is most significant in determining whether the shipment conformed?

  1. Whether the regional usage of trade is a course of performance that binds the furniture maker.
  2. Whether the parties' course of dealing or the regional usage of trade should define 'first-quality lumber' for the current contract. (correct answer)
  3. Whether the current contract is unenforceable because the term 'first-quality lumber' is indefinite.
  4. Whether the furniture maker's rejection of the shipment was a breach of the duty of good faith.
Explanation: Whenever you see a contract dispute about the meaning of an undefined term, think about the UCC's hierarchy of interpretive evidence: express terms, course of performance, course of dealing, and usage of trade. Here, the key fight is between the parties' prior dealings (their course of dealing defined "first-quality lumber" as no knots over 1/4 inch) and the regional trade's general understanding (usage of trade allows knots up to 1/2 inch). That is exactly why the correct answer is that the most significant issue is whether the parties' course of dealing or the regional usage of trade should define the term. Course of dealing is prior conduct between the same parties, while usage of trade is broader industry practice, and courts reconcile them unless one is unreasonable or expressly negated. The distractor saying regional usage is a course of performance is wrong: course of performance means behavior under the current contract, not regional custom. The suggestion that the contract is unenforceable for indefiniteness is also wrong — "first-quality lumber" has enough meaning to be supplied by extrinsic evidence. Finally, the furniture maker's rejection is not primarily a good-faith issue; good faith matters, but the real dispute is which interpretive source controls the term. On exam day, when you see an undefined trade term, immediately map the evidence into UCC categories: course of performance, course of dealing, and usage of trade. That framework will keep you from confusing prior contracts with current conduct or industry custom.

Question 2

Seller and Buyer have entered into four separate contracts over three years for the sale of No. 2 yellow corn. In each prior contract, both parties treated the term 'bushel' as meaning 56 pounds and settled their accounts on that basis. The current contract, also for No. 2 yellow corn, states that Buyer will purchase '10,000 bushels' but does not define 'bushel.' In the regional grain trade, there is a regular and widely observed usage that a 'bushel' of No. 2 yellow corn means 60 pounds. Seller delivered corn measured at 60 pounds per bushel. Buyer rejected the excess, insisting that 'bushel' means 56 pounds as in the parties' prior dealings.

The governing statute and official comment provide in relevant part: § 1-303(b): A 'course of dealing' is 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. § 1-303(c): A 'usage of trade' is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. § 1-303(d): A course of dealing between the parties ... or a usage of trade in the vocation or trade in which they are engaged or of which they are or should have been aware is relevant ... and may supplement or qualify the terms of the agreement. § 1-303(e): Except as otherwise provided in subsection (f), express terms prevail over course of performance, course of dealing, and usage of trade. Official Comment: As between a course of dealing and a usage of trade, the course of dealing controls.

Who is likely to prevail on the meaning of 'bushel'?

  1. Buyer, because the current contract is not a 'particular transaction' for purposes of course-of-dealing evidence.
  2. Buyer, because the parties' course of dealing is a more reliable indicator of their common understanding than the regional usage of trade. (correct answer)
  3. Seller, because a regular usage of trade in the region defines 'bushel' and binds both parties unless expressly excluded.
  4. Seller, because a course of dealing may not be used to supplement an express term such as '10,000 bushels.'
Explanation: When you see a UCC interpretation question pitting prior dealings against trade custom, your first move is to recall the priority rules in § 1-303. The official comment is decisive here: "As between a course of dealing and a usage of trade, the course of dealing controls." Buyer prevails because over three years and four contracts, both parties consistently treated "bushel" as 56 pounds — that is a classic course of dealing establishing a common basis of understanding for the current transaction. While the regional grain trade's 60-pound usage is relevant and could supplement the agreement, it directly conflicts with the parties' established pattern, and the UCC's priority rule gives course of dealing the edge. The distractor claiming the current contract is not a "particular transaction" misreads the statute — course of dealing exists precisely to interpret the current transaction based on prior conduct. The answer suggesting Seller wins because usage of trade binds unless excluded also misses the priority rule; usage is relevant, but it yields to an established course of dealing when the two conflict. Finally, the claim that course of dealing cannot supplement an express term like "10,000 bushels" fails because "bushel" is undefined — the quantity is express, but its meaning is ambiguous, which is exactly what § 1-303(d) lets course of dealing clarify. Study tip: when course of dealing and usage of trade collide on the exam, course of dealing wins every time — the parties' shared history is a more reliable window into their intent than industry custom.

Question 3

Buyer and Seller entered into a contract for the sale of packaging supplies. The contract states: 'Delivery shall be made promptly after Seller receives Buyer's purchase order.' It does not define 'promptly.' In a dispute over whether delivery was timely, Seller seeks to introduce evidence that, in the regional packaging trade, 'promptly' is regularly understood to mean within 10 business days after receipt of a purchase order. Seller first disclosed its intention to rely on this usage in a pretrial disclosure served on Buyer 10 days before trial. The disclosure identified the specific usage, the transaction to which it applies, and the witnesses who would testify about it. The court is satisfied that Buyer has adequate opportunity to respond and will not be unfairly surprised. Buyer nevertheless objects to the evidence.

The governing statute provides in relevant part: § 1-303(c): A 'usage of trade' is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. § 1-303(g): Evidence of a relevant usage of trade offered by one party is not admissible unless the party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.

How should the court rule on Buyer's objection?

  1. Exclude the evidence, because a usage of trade may not be used to give meaning to an express term such as 'promptly.'
  2. Exclude the evidence, because notice of a usage of trade must be given before the contract is formed.
  3. Admit the evidence, because no notice is required when the opposing party is engaged in the same trade.
  4. Admit the evidence, because the court finds that the pretrial disclosure was sufficient to prevent unfair surprise. (correct answer)
Explanation: Whenever you see a usage-of-trade issue, focus on two things: whether the usage can explain the parties' language, and whetherthe proponent gave sufficient notice. Under UCC §1-303, a usage of trade can give meaning to an express term — especially one like "promptly" that the contract never defines — so long as it doesn't contradict the express term's plain meaning. Here the trade usage explains what "promptly" means in this regional packaging market, so that is permissible. The real fight is notice. Section 1-303(g) does not require notice before contract formation; it requires notice "that the court finds sufficient to prevent unfair surprise." Seller's pretrial disclosure came 10 days before trial, identified the particular usage, the transaction, andthe witnesses, andthe court specifically found Buyer had adequate opportunity to respond and would not be unfairly surprised. That satisfies the statutory standard. Admit the evidence. Buyer's objections miss this framework. The idea that a usage of trade "may not be used to give meaning to an express term" is wrong because usage supplements explains ambiguous contract language unless it contradicts it. The claim that notice "must be given before the contract is formed" is also wrong — notice can come later if the court finds no unfair surprise. And there is no automatic rule that "no notice is required when the opposing party is engaged in the same trade"; even a sophisticated industry member is entitled to notice under the statute, though acourt could weigh that fact in assessing unfair surprise. On the bar exam, when evidence of trade usage is challenged, don't ask whetherthe usage is relevant — ask whetherthe court could reasonably find the notice sufficient to prevent unfair surprise..

Question 4

A homeowner contracted with a window company to install custom windows. The contract stated: 'Any change to the work must be in writing and signed by both parties.' During the first two weeks, the homeowner made three oral change requests, and the company's crew followed them and submitted invoices for the extra work, which the homeowner paid. When the homeowner made a fourth oral request, the company refused, pointing to the writing requirement. The homeowner says the parties' practice shows that oral change orders were accepted.

Which legal issue is most significant in resolving the dispute?

  1. Whether the company's invoices for extra work established a usage of trade.
  2. Whether the homeowner's oral requests were offers to modify the contract that the company accepted by performing.
  3. Whether the parties' course of performance waived the contract's written-change-order requirement. (correct answer)
  4. Whether the homeowner's payment of the invoices was a course of dealing.
Explanation: This question tests contract modification and the effect of a written "no oral changes" clause. Whenever a contract says changes must be in writing, the key follow-up is whether the parties' later conduct has waived that requirement—not whether the modification was otherwise valid. Here, the homeowner made oral change requests, the company performed them, invoiced the extra work, and the homeowner paid. That repeated pattern is course of performance: conduct between the parties during the current contract. Under UCC § 2-209, a written modification clause is enforceable, but a party can waive it through course of performance. So the most significant issue is whether the parties' course of performance waived the contract's written-change-order requirement. If yes, the fourth oral request may also be enforceable despite the writing clause. The wrong choices each mislabel the legal concept. Whether the company's invoices established a usage of trade is off—usage of trade is an industry-wide practice, not one company's invoices. Whether the oral requests were offers to modify accepted by performing describes an ordinary modification, but it fails to address the writing clause, which is the real obstacle. Whether the homeowner's payment was a course of dealing is also wrong: course of dealing refers to prior transactions between the same parties before this contract, not their conduct during it. Study tip: distinguish course of performance (this contract), course of dealing (earlier contracts), and usage of trade (industry custom). When a writing requirement appears, ask whether later conduct waived it.

Question 5

A supplier and a contractor had three successive one-year contracts for industrial fasteners. Under each prior contract, the supplier's invoices stated a separate 'restocking fee' for any order reduced after confirmation, and the contractor paid that fee twice. The new one-year contract says only 'Price per order: $500' and does not mention restocking fees. After the contractor reduced an order for the first time under the new contract, the supplier charged the same restocking fee. The contractor refused to pay.

Which legal issue is most significant in determining whether the fee applies?

  1. Whether the parties' prior contracts and paid invoices are a course of dealing that supplements the new contract. (correct answer)
  2. Whether the supplier's first restocking-fee invoice under the new contract is a course of performance.
  3. Whether the contractor's reduction of the order was a breach of the new contract.
  4. Whether the fasteners industry's restocking-fee practice is a course of dealing between the parties.
Explanation: This question tests how prior conduct between the same parties fills gaps in a later contract. Whenever a written contract is silent on a term, ask whether the parties' own history establishes a common basis of understanding before you turn to industry custom or later conduct. Here, the new contract says only "Price per order: $500" and is silent on restocking fees. The supplier's prior invoices separately stated a restocking fee, and the contractor paid it twice. Under UCC gap-filling principles, a course of dealing—a sequence of previous conduct between the parties that is fairly regarded as establishing a common basis of understanding—can supplement or explain the terms of a later contract. That prior pattern is the most significant issue because it directly connects these parties' own past agreement to the silent term. The supplier's first restocking-fee invoice under the new contract is not a course of performance; course of performance is conduct occurring after the contract begins and repeated, whereas the supplier's single invoice is a unilateral assertion. The contractor's reduction of an order is not the controlling legal issue; whether a breach occurred depends on the contract's terms, and the fee question is a gap-filling question, not a damages question. Finally, an industry restocking-fee practice is a usage of trade, not a course of dealing between these parties; it might matter, but the parties' own prior dealings carry more weight. Study tip: when a contract is silent, follow the UCC hierarchy—express terms, then course of performance, then course of dealing, then usage of trade.

Question 6

Buyer agreed to buy its monthly requirements of wine, estimated at 100 cases, from Seller for one year. The contract does not state a fixed quantity. On the first monthly delivery, Seller delivered 105 cases and Buyer accepted and paid for 105. Seller's second monthly delivery also contained 105 cases, and Buyer rejected the five extra cases. Seller argues that a course of performance has been established under which monthly deliveries of 105 cases are acceptable.

The governing statute provides:

§ 1-303(a): A "course of performance" is a sequence of conduct between the parties to a particular contract that exists if: (1) the contract of the parties involves repeated occasions for performance by a party; and (2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

§ 1-303(d): A course of performance between the parties is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms, and may supplement or qualify the terms of the agreement.

Which of the following is the best response to Seller's argument?

  1. The argument fails because one accepted delivery is not a repeated occasion of performance sufficient to create a course of performance. (correct answer)
  2. The argument fails because course-of-performance evidence may not be used to interpret a contract that is silent on quantity.
  3. The argument succeeds because Buyer's acceptance and payment on the first delivery made Seller reasonably rely on Buyer's acquiescence.
  4. The argument succeeds because the contract called for repeated monthly deliveries and Buyer accepted the first delivery with knowledge of the quantity.
Explanation: Whenever you see a course-of-performance issue under UCC § 1-303, your first question should be: was there a repeated, accepted sequence of conduct? A course of performance is not created by a single event; it grows out of a party's knowing, unobjected-to acceptance over repeated occasions under the same contract. Here, Buyer accepted the first 105-case delivery, but immediately rejected the extra five cases on the second delivery. That means Seller never established a "sequence of conduct" or repeated occasion of Buyer's acquiescence in 105 cases. One accepted delivery is simply not enough to give the term "requirements" a course-of-performance meaning of 105 cases, so Seller's argument fails. The incorrect answers each miss this core point. The claim that course-of-performance evidence may not be used to interpret a contract silent on quantity is wrong as a matter of law: under § 1-303(d), course of performance may "supplement or qualify" agreement terms, including quantity, so the problem is not admissibility but insufficient evidence. The argument that Seller reasonably relied on Buyer's acquiescence confuses course of performance with reliance-based doctrines; Buyer's prompt rejection of the second shipment defeated any consistent pattern. Finally, the argument that the contract called for repeated monthly deliveries and Buyer accepted the first delivery ignores the statutory requirement of repeated occasions of acceptance—the contract's structure alone is not enough without Buyer's continued acquiescence. Study tip: on bar-exam questions, watch for "one-time conduct" dressed up as a course of performance; remember a course requires a sequence, not a single event.

Question 7

Buyer agreed to buy 'one truckload of topsoil per month' from Seller for one year. The contract does not define 'truckload.' In the local landscaping trade, there is a regular usage that a truckload of topsoil is 10 cubic yards. During the first six months, Seller delivered 8 cubic yards each month and Buyer accepted and paid for 8 cubic yards. In month seven, Seller delivered 10 cubic yards and invoiced Buyer for 10. Buyer rejected the extra 2 cubic yards.

The governing statute and official comment provide in relevant part: § 1-303(a): A 'course of performance' is a sequence of conduct between the parties to a particular contract that exists if the contract involves repeated occasions for performance by a party and the party knows or has reason to know that the other party is relying on the conduct in accepting or acquiescing in the performance. § 1-303(c): A 'usage of trade' is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. § 1-303(d): A course of performance ... or a usage of trade ... is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms, and may supplement or qualify the terms of the agreement. § 1-303(e): Except as otherwise provided in subsection (f), express terms prevail over course of performance, course of dealing, and usage of trade. Official Comment: As between a course of performance and a usage of trade, the course of performance controls.

Who is likely to prevail on the meaning of 'truckload'?

  1. Seller, because the regional usage of trade defines 'truckload' and is binding on Buyer even if Buyer was unaware of it.
  2. Seller, because a course of performance may not be used to contradict the express term 'one truckload per month.'
  3. Buyer, because the parties' course of performance controls over the usage of trade. (correct answer)
  4. Buyer, because a usage of trade is admissible only when it is consistent with a course of dealing between the parties.
Explanation: This question tests how the UCC resolves ambiguity in contract terms using extrinsic evidence. When a term like "truckload" is undefined, you should look to the parties' actual conduct and trade usage, and then apply the UCC's hierarchy. Under § 1-303, a course of performance is relevant to give meaning to specific terms, and the Official Comment states that as between a course of performance and a usage of trade, the course of performance controls. Here, the parties had six repeated monthly deliveries of 8 cubic yards, and Buyer accepted and paid for each delivery. That conduct establishes a course of performance that gives "truckload" its particular meaning. Seller's later 10-cubic-yard delivery did not match that meaning, so Buyer may reject the extra 2 cubic yards. The wrong answers miss the hierarchy. The choice saying the regional usage of trade binds Buyer "even if Buyer was unaware of it" ignores that course of performance controls over trade usage. The choice saying a course of performance "may not be used to contradict the express term" mischaracterizes the issue: "one truckload per month" is ambiguous, so the course of performance is used to ascertain its meaning, not contradict it. The final choice, that usage of trade is admissible only when consistent with a course of dealing, misstates the law—course of dealing is a separate source of meaning, not a precondition to trade usage. Study tip: in UCC interpretation questions, remember the priority—express terms, then course of performance, course of dealing, and usage of trade, with course of performance beating usage of trade.

Question 8

Buyer and Seller entered into a written contract for the sale of 5,000 custom-printed T-shirts. The contract states: 'Price: $8.00 per shirt; payment due 30 days after invoice. This writing contains the complete and exclusive statement of the parties' agreement.' The contract is silent on shipping. In three prior contracts between the same parties, Seller always paid the freight and delivered the T-shirts to Buyer's loading dock, and Buyer never paid a shipping charge. Buyer now insists that, under the parties' course of dealing, the $8.00 price includes delivery to Buyer's loading dock. Seller objects that the merger clause excludes evidence of the prior course of dealing.

The governing statute provides in relevant part: § 1-303(b): A 'course of dealing' is 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. § 1-303(d): A course of dealing between the parties to the contract ... is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms, and may supplement or qualify the terms of the agreement. § 2-202: Terms ... in a writing intended by the parties as a final expression ... may not be contradicted by evidence of any prior agreement ... but may be explained or supplemented (a) by course of performance, course of dealing, or usage of trade; and (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

Is Buyer's evidence of the prior course of dealing admissible?

  1. Yes, because a merger clause applies only to prior oral agreements, not to a course of dealing.
  2. Yes, because a course of dealing may explain or supplement a written agreement even when the writing is a complete and exclusive statement. (correct answer)
  3. No, because the merger clause makes the writing complete and exclusive and therefore excludes all extrinsic evidence.
  4. No, because a course of dealing may not be used to add a term on which the written contract is silent.
Explanation: Whenever you see a written contract with a merger clause paired with a party trying to introduce prior behavior, you are testing the intersection of the parol evidence rule and UCC course of dealing. The key distinction is between prior agreements (which the merger clause blocks) and course of dealing (which the UCC explicitly protects). Here, the correct answer is that the course of dealing is admissible because § 2-202(a) allows a course of dealing to explain or supplement a written agreement—even one intended as a complete and exclusive statement. The merger clause only strips the power of consistent additional terms under subsection (b); it does not bar the interpretive tools in subsection (a). Because the contract is silent on shipping, the prior practice of Seller paying freight supplements that silence. Now, consider the wrong answers. The claim that a merger clause applies only to prior oral agreements is false—it applies to prior written and oral agreements alike, but it cannot block a course of dealing. The answer that a merger clause excludes all extrinsic evidence is far too broad; it excludes prior agreements and additional terms, but not course of dealing, course of performance, or usage of trade. Finally, the answer stating that a course of dealing may not be used to add a term on which the contract is silent is directly contradicted by the statute, which explicitly allows it to supplement the terms. Study tip: On the next-gen bar, when a question involves a merger clause and § 2-202, remember the exception: the clause kills prior agreements, but it never kills course of dealing, course of performance, or usage of trade for interpretive purposes.

Question 9

Seller agreed to sell Buyer 12,000 gallons of solvent, delivered in 12 equal monthly installments over one year. The written contract states: 'Delivery terms: F.O.B. Seller's plant.' During the first ten months, Seller, at its own expense, delivered each installment to Buyer's warehouse, and Buyer accepted. No written modification was signed. Seller then sent Buyer written notice that, beginning with the next installment, Seller would make the goods available at its plant as the contract provided. Buyer has not changed position in reliance on the prior deliveries. Buyer sues, seeking an order requiring Seller to continue delivering to the warehouse.

The governing statute provides in relevant part: § 1-303(a): A 'course of performance' is a sequence of conduct between the parties to a particular contract that exists if the contract involves repeated occasions for performance by a party and the party knows or has reason to know that the other party is relying on the conduct in accepting or acquiescing in the performance. § 1-303(d): A course of performance ... is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms, and may supplement or qualify the terms of the agreement. § 1-303(e): Except as otherwise provided in subsection (f), express terms prevail over course of performance, course of dealing, and usage of trade. § 1-303(f): Subject to Section 2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance. § 2-209(5): A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

Who is likely to prevail?

  1. Buyer, because the ten-month course of performance gave particular meaning to the delivery term and therefore overrides the express F.O.B. term.
  2. Buyer, because Seller's repeated delivery to the warehouse was a course of performance that operated as a permanent waiver of the F.O.B. term.
  3. Seller, because course-of-performance evidence is never relevant when the contract contains a clear express term.
  4. Seller, because the express term controls and, in any event, Seller validly retracted any waiver before Buyer relied on it. (correct answer)
Explanation: Whenever you see course-of-performance evidence in a UCC contracts question, remember the hierarchy: express terms usually prevail over course of performance, but course of performance can show waiver or modification. Here, the contract expressly said "F.O.B. Seller's plant," so Seller's delivery obligation was to make solvent available at its plant. Seller's ten-month practice of delivering to Buyer's warehouse was a course of performance that could give meaning to the delivery term and might show a waiver of the F.O.B. term. However, § 2-209(5) allows a party to retract a waiver affecting the executory portion of the contract by reasonable notice, unless the other party materially changed position in reliance. Seller sent written notice retracting before the next installment, and Buyer has not changed position in reliance. Therefore, Seller validly retracted any waiver, and the express F.O.B. term controls going forward. "Course of performance gave particular meaning and therefore overrides the express F.O.B. term" is wrong because § 1-303(e) says express terms prevail over course of performance; course of performance can supplement or qualify terms, but it cannot simply override a clear express term. "Permanent waiver" is wrong because a waiver affecting future performance is retractable until reliance occurs. "Course-of-performance evidence is never relevant when the contract contains a clear express term" is wrong because evidence is still relevant under § 1-303(f) to show waiver or modification. On exam day, spot "F.O.B." plus repeated contrary performance and immediately think: waiver is presumptively retractable absent detrimental reliance.

Question 10

A bakery and a flour mill entered a six-month contract for 'approximately 500 bags of flour per week.' The contract did not define 'approximately.' In each of the first four weeks, the mill delivered 507, 512, 508, and 511 bags, and the bakery accepted and paid for each delivery without comment. In the fifth week, the mill delivered 545 bags. The bakery refused to accept the excess, saying 'approximately' meant no more than about 510 bags. The mill responded that the parties' practice under the contract showed that deliveries above 500 were acceptable.

Which legal issue is most significant in resolving this dispute?

  1. Whether the bakery's acceptance of the first four deliveries is a course of performance that gives meaning to the term 'approximately.' (correct answer)
  2. Whether the first four deliveries and payments created an implied-in-fact contract for a higher weekly quantity.
  3. Whether the flour industry's customary tolerance for delivery quantities is a course of dealing between these parties.
  4. Whether the bakery's refusal of the fifth delivery was a breach of the implied duty of good faith.
Explanation: Whenever you see an ambiguous contract term like "approximately," you're in UCC interpretation territory—specifically, how courts give meaning to vague terms. The key is to look at the parties' own conduct under the current contract before considering industry norms or external evidence. Here, the mill's deliveries of 507, 512, 508, and 511 bags in the first four weeks—which the bakery accepted and paid for without complaint—form a course of performance. Under UCC § 2-202, this repeated, unobjected-to conduct is the strongest evidence of how the parties themselves interpreted "approximately 500." The bakery's sudden refusal at 545 bags contradicts its own prior acceptance of deliveries above 500, making the interpretive question of whether that course of performance defines the term the most significant legal issue. The wrong answers each miss the mark. The implied-in-fact contract for a higher weekly quantity is a trap: the parties never manifested a new agreement to a different quantity—they were merely performing the original "approximately 500" contract, so no separate contract exists. The flour industry's customary tolerance mislabels the concept; that would be a usage of trade, not a course of dealing, which refers to prior transactions between these specific parties before this contract, not industry-wide practice. Finally, the implied duty of good faith is a background principle, but the dispute isn't about bad faith—it's about the meaning of a term, which the course of performance resolves directly. Remember the hierarchy: express terms > course of performance > course of dealing > usage of trade. When a term is vague, look first to how the parties acted under the very contract in question.

Question 11

A manufacturer in Ohio agreed to sell 'Grade A industrial bearings' to a distributor in Texas. The parties had never done business before, and the written contract did not define 'Grade A.' In the industrial bearing trade, buyers and sellers have consistently treated 'Grade A' as requiring a specified surface finish and tolerance. The manufacturer, which had previously sold only to aerospace customers, did not know of that trade practice. The distributor rejected the bearings as not 'Grade A.'

Which legal issue is most significant in determining whether the rejection was proper?

  1. Whether the manufacturer's lack of awareness of the trade practice makes the contract voidable for mutual mistake.
  2. Whether the manufacturer's lack of prior dealings with the distributor is a course of dealing.
  3. Whether the distributor's rejection of the bearings was an anticipatory repudiation of the contract.
  4. Whether the industrial bearing trade's understanding of 'Grade A' is a usage of trade that supplements the contract. (correct answer)
Explanation: When you see an undefined trade term in a sales contract, ask what sources of meaning the UCC allows to fill the gap: express terms, course of dealing, and usage of trade. Here, "Grade A" was not defined, and the parties had never dealt before, so course of dealing drops out. The critical question is whether the industrial trade's consistent treatment of "Grade A" as requiring a specified finish and tolerance is a usage of trade. Under the UCC, an established usage of trade supplements and explains contract terms, and it applies when a party is engaged in the trade or has reason to know it. So the distributor's rejection was proper if the bearings failed that standard; the manufacturer's unawareness is not automatically a defense, because the trade usage supplies the term objectively. The mutual-mistake argument is a trap: a trade usage is not an erroneous assumption by both parties making the contract voidable; it is an objective interpretive backdrop to the deal. The no-prior-dealings point misses the issue too: course of dealing requires a sequence of previous conduct between the same parties, and none exists, but that does not defeat usage of trade — an industry custom can bind even in a first transaction. Finally, the rejection of delivered bearings as nonconforming is not an anticipatory repudiation; that doctrine concerns a party's pre-performance announcement that it will not perform. Practical takeaway: when an undefined term is disputed, ask whether an established trade usage gives it content — that is usually the decisive issue.