This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In many kinds of business, however, a great number of usages and customs have gradually been built up. These customs are rarely carried in express terms into contracts made with reference to such kinds of business, yet they are ordinarily intended by the parties as terms of such contracts. Accordingly, even though the contract is in writing, extrinsic evidence may be resorted to to show usages and customs of such business consistent with the contract, and either known to the parties to the contract,1 or so notorious that one dealing in such business must be presumed to know it.2 Under a contract of sale, a trade usage may be shown to establish the existence of an implied warranty.3 Under a contract for dividing net profits, a trade custom of making an annual inventory may be shown.4 A principal who employs a broker is bound by the customs of the market at which such broker acts,5 and the actual knowledge of such principal is immaterial.6 In an oral contract of insurance not specifying when it is to take effect extrinsic evidence of a custom as to when the risk attaches is admissible.7 So under a contract to pay twelve dollars an acre for clearing a right of way at points to be designated, it has been held proper to show a custom to pay for clearing in open fields only such proportion of the contract price as such work bears to the work of clearing in the forest.8 So under a binding slip issued by an insurance company which recites that it is issued to the insured to protect him against loss for a certain time and amount, but which is incomplete as not showing the consideration, it may be shown that the custom of the insurance business is to issue such slips pending the acceptance or rejection of the policy and that in case of rejection, liability under the binding slip ceases at once.9 If a general custom in a certain business requires payment for each separate carload, such custom renders the contract severable so that a shortage as to one car does not discharge the contract as to other carloads.10 A general custom may make the employer liable to his employes for time lost when the business is shut down,11 A local custom may require a common carrier to give notice to the shipper of failure to deliver goods within a specified time.12 A custom to the effect that the buyer of a vessel acquires all the credits which have been earned by it and which are unpaid, and that he becomes liable for all debts thereon, is a part of such a contract of sale.13 In the absence of a specific provision as to the rate of compensation, the usual and customary rate will be implied.14 A local custom as to the division of attorney's fees may be considered.15
5 Supreme Lodge Knights of Pythias v. Kalinaki, 163 U. S. 289, 41 L. ed. 163.
6 Robinson v. Templar Lodge, 117 Cal. 370, 59 Am. St. Rep. 193, 49 Pac. 170; Hass v. Relief Association, 118 Cal. 6, 49 Pac. 1056; Lawson v. Hewell, 118 Cal. 613, 49 L. R. A. 400, 50 Pac. 763; Daughtry v. Knights of Pythias, 48 La. Ann. 1203, 55 Am. St. Rep. 310, 20 So. 712.
7Sieverts v. Benevolent Association, 95 Ia. 710, 64 N. W. 671; Cohen v. Supreme Sitting, 105 Mich. 283, 63 N. W. 304; Strause v. Life Association, 126 N. Car. 971, 54 L. R. A. 60, 36 S. E. 352 [rehearing denied, 128 N. Car. 465, 54 L. R. A. 605, 39 S. E. 55]; Hale v. Aid Union, 168 Pa. St. 377, 31 Atl. 1066.
1 United States. National Bank v. Burkhardt, 100 U. S. 686, 25 L. ed. 766; Hostetter v. Park, 137 U. S. 30, 34 L. ed. 568; Moore v. United States, 196 U. S. 157, 166, 49 L. ed. 428; Kauffman v. Raeder, 108 Fed. 171. 54 L. R. A. 247, 47 C. C. A. 278; The Indrapura, 238 Fed. 853; Kawin v. American Colortype Co., 243 Fed. 317, 156 C. C. A. 97; Central Commercial Co. v. Jones-Dusenbury Co., 251 Fed. 13; Neer v. Lang, 252 Fed. 575.
Alabama. Middleton v. Western Union Telegraph Co., 107 Ala. 243, 72 So. 548; Lutz v. Van Heynigen Brokerage Co., - Ala. - , 75 So. 284; Smith v. Waldrop, - Ala. - , 77 So. 331.
Arkansas. Bush v. Southern Grocery Co., - Ark. - -, 208 S. \V. 209.
Connecticut. Kinney v. Horwitz, - Conn. - , 105. Atl. 438.
Georgia. Farmers' Ginnery &, Mfg. Co. v. Thrasher, 144 Ga. 598, 87 S. E. 804.
Iowa. Nagel v. Meier (Ia.), 155 N. W. 813.
Kansas. Strong v. Ringle, 96 Kan. 573, 152 Pac. 631; Rains v. Weiler, 101 Kan. 294, L. R. A. 1917F. 571. 166 Pac. 235.
Maryland. Himmel v. Levinstein, - Md. - , 103 Atl. 848.
Massachusetts. South Deerfield Onion Storage Co. v. New York, N. H. & H. R. Co., 222 Mass. 535, 111 X. E. 367; Roach v. Lane, 226 Mass. 598, 116 X. E. 470.
New York. Rinaldi v. Mohican Co., 225 N. Y. 70, 121 N. E. 471; Bolles v. Scheer, 225 N. Y. 118, 121 N. E. 771.
South Carolina. Friedheim v. Hildic Co., 104 S. Car. 378, 89 S. E. 358; Burden v. Woodside Cotton Mills, 104 S. Car. 435, 89 S. E. 474.
Vermont. G. R. Bianchi Granite Co. v. Terre Haute Monument Co., 91 Vt. 177, 99 Atl. 875.
Washington. Cormier v. Martin Lumber Co.. 98 Wash. 463, 167 Pac. 1105.
2 Silverstein v. Michau, 221 Fed. 55, 137 C. C. A. 79; Farley Nat. Bank v. Pollock, 145 Ala. 321, 117 Am. St. Rep. 44, 2 L. R. A. (N.S.) 194, 8 Ann. Cas. 370, 39 So. 612; People v. Traves, 188 Mich. 415, 154 N. W. 120; Van Dusen-Harrington Co. v. Jungeblut, 75 Minn. 298, 74 Am. St. Rep. 463, 77 N. W. 970.
3 Rinaldi v. Mohican Co., 225 N. Y 70, 121 N. E. 471.
4Bolles v. Scheer, 225 N. Y. 118, 121 N. E. 771.
5 Van Dusen-Harrington Co. v. Jungeblut, 75 Minn. 298, 74 Am. St. Rep. 463, 77 N. W. 970; Miller v. Great Western Commission Co.. 98 Neb. 392, 152 N. W. 787.
6 Miller v. Great Western Commission Co., 08 Neb. 392, 152 N. W. 787.
7 Cleveland Oil Co. v. Ins. Society, 34 Or. 228, 55 Pac. 435.
8 McCarthy v. McArthur, 69 Ark. 313, 63 S. W. 56.
9 Underwood v. Ins. Co.. 161 N. Y. 413, 55 N. E. 936.
10 Roach v. Lane, 226 Mass. 598, 114 N. E, 470.
In the absence of specific provision in the contract, custom or usage may be considered in determining what constitutes performance of such contract.16 Under a contract for the delivery of goods, evidence of a trade usage as to variation is admissible if such variation is slight.17 Under a contract for the sale of goods a custom as to the method for settling for defects is to be regarded as fixing the rights of the parties in the absence of specific provision in such contract.18 Under a contract of sale, a trade custom as to inspection and method of payment may be shown.19 In an action against a common carrier to recover for the value of goods which have been destroyed, a custom that the bill of lading was to be surrendered may be shown to determine when delivery was made.20
While usages and customs may be regarded as a part of a contract, they can not be a substitute for a contract; and the parties to a transaction can not be held to be bound by a contract by reason of a custom or usage unless they actually intended to em into a contract.21
11 Cormier v. Martin Lumber Co., 98 Wash. 463, 167 Pac. 1105.
12 South Deerfield Onion Storage Co. v. New York, N. H. & H. R. Co., 222 Mass. 535, 111 N. E. 367.
13Donnell v. G. G. Deering Co., 115 Me. 32, 97 Atl. 130.
14 Seward v. M. Seward & Son Co., 91 Conn. 190, 99 Atl. 887; Godefroy v. Hupp, 93 Wash. 371, Ann. Cas. 19I8E, 494, 160 Pac. 1056.
15Smith v. Waldrop, - Ala. - , 77 So. 331.
16Fleisher v. Abbott, 222 Fed. 211, 137 C. C. A. 525 [reversing, Abbott v. Fleisher, 217 Fed. 828]; Kawin v. American Colortype Co., 243 Fed. 317, 156 C. C. A. 97; Central Commercial Co. v. Jones-Dusenbury Co., 251 Fed. 13; Roach v. Lane, 226 Mass. 598, 116
X. E. 470; Oswego Falls Pulp & Paper Co. v. Stecker Lithographic Co., 215 N. Y. 98, L. R. A. 1916B, 1257, 109 N. E. 92; G. R. Bianchi Granite Co. v. Terre Haute Monument Co., 91 Vt. 177, 99 Atl. 875.
17Oswego Falls Pulp & Paper Co. v. Stecker Lithographic Co., 215 N. Y. 98, L. R. A. 1916B, 1257, 109 K E. 92; G. R. Bianchi Granite Co. v. Terre Haute Monument Co., 91 Vt. 177, 99 Atl. 875.
18Folley v. Smith, 103 S. Car. 445, 88 S. E. 24.
19 Kinney v. Horwitz, - Conn. - , 105 Atl. 438; Roach v. Lane, 226 Mass. 598, 116 N. E. 470.
20 Bush v. Southern Grocery Co., - Ark. - , 208 S. W. 299.