In interpreting contract terms based on conduct of the parties, which factor is third in order of importance?

• A. Parol evidence not considered
• B. Usage of trade
• C. Course of performance between the parties
• D. Course of dealing between the parties

Answer: (B)

Interpreting contract terms by looking at how the parties behaved involves a hierarchy of evidence: course of performance between the parties is the most persuasive because it reflects how the current contract was actually carried out. Next comes course of dealing, which shows patterns from the parties’ previous transactions. The least persuasive is usage of trade, which reflects industry-wide practices rather than the specific agreement or its past dealings between these parties. Therefore, usage of trade is third in order of importance. Parol evidence rules govern what extrinsic evidence is admissible, but that’s a separate consideration from the relative weight given to these conduct-based factors.