The phrase ‘course of performance’ refers to the way the parties have acted in performance of the particular contract in question. It is the systematic and uniform conduct in which parties engage after they enter into a contract. It can also be a sequence of previous performance by either party after an agreement has been entered into, when a contract involves repeated occasions for performance and both parties know the nature of the performance and have an opportunity to object to it.
A course of performance that is accepted or acquiesced in without objection is relevant in ascertaining the meaning of the parties' agreement. It can interpret particular meaning to specific terms of the agreement and may supplement or qualify the terms of the agreement.
Example of a state statute defing course of performance.
In Colorado, C.R.S. 4-1-303 of Colorado revised statutes, under uniform commercial code defines course of performance as follows.
4-1-303. Course of performance, course of dealing, and usage of trade
(a) A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if:
(1) The agreement of the parties with respect to the transaction 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.
(b) A "course of dealing" is a sequence of conduct concerning previous transactions 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.
(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. The existence and scope of such a usage are to be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.
(d) A course of performance or course of dealing between the parties, or usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware, is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
(e) Except as otherwise provided in subsection (f) of this section, the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade shall be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:
(1) Express terms prevail over course of performance, course of dealing, and usage of trade;
(2) Course of performance prevails over course of dealing and usage of trade; and
(3) Course of dealing prevails over usage of trade.
(f) Subject to section 4-2-209, a course of performance is relevant to show a waiver or modification of any term inconsistent with the course of performance.
(g) Evidence of a relevant usage of trade offered by one party is not admissible unless that party has given the other party notice that the court finds sufficient to prevent unfair surprise to the other party.