Contracts often establish rights and responsibilities that continue long after an agreement is signed. As the parties carry out their obligations, they may develop a consistent pattern of conduct that reflects how they understand the contract’s terms.
When disputes arise, courts may consider this history of performance when interpreting certain contractual provisions. Understanding how courts evaluate course of performance can provide helpful insight into one of the many principles that may influence contract interpretation.
What Course of Performance Means
Course of performance refers to how the parties have actually performed under a contract after it became effective. Rather than focusing solely on the written agreement, courts may also consider whether the parties consistently acted in a manner that reflects a shared understanding of its provisions.
This concept most often arises when a contract requires repeated performance over time. A consistent pattern of conduct may provide useful context for interpreting contractual language that becomes the subject of a dispute.
Why the Written Contract Still Matters
The written agreement remains the primary source for determining the parties’ contractual rights and obligations. Courts generally begin by examining the language of the contract itself before considering other factors.
If questions remain about how a provision should be interpreted, courts may evaluate whether the parties’ own conduct provides additional insight into what they intended the provision to mean during the course of their relationship.
How Consistent Conduct May Influence Interpretation
Courts often look for repeated actions that demonstrate a consistent understanding of the agreement. A long-standing pattern of performance may carry greater significance than an isolated event that occurred only once.
The surrounding circumstances may also be relevant. Courts may evaluate whether both parties accepted the pattern of performance and whether it remained consistent throughout the contractual relationship.
Why Context Can Be Important
Every contract exists within its own factual circumstances. Courts may consider the nature of the agreement, the relationship between the parties, and the events surrounding their performance when interpreting disputed provisions.
This broader context can help courts understand whether the parties consistently treated a contractual obligation in a particular way over time.
Course of Performance Is Only One Consideration
Course of performance is only one factor that courts may evaluate when interpreting a contract. The language of the agreement, applicable legal principles, and the evidence presented in the dispute all remain important parts of the analysis.
Rather than replacing the written terms of a contract, course of performance may help explain how those terms were understood and applied during the parties’ ongoing relationship.
Why This Doctrine Can Affect Contract Disputes
Many contract disputes center on the meaning of a particular provision rather than whether a valid agreement exists. Examining the parties’ conduct over time may provide additional context that helps courts interpret the contract.
Understanding how courts evaluate contract interpretation by course of performance can provide valuable insight into how contractual disputes may be analyzed when disagreements arise over the meaning of an agreement.
