Can custom and trade usage be used to interpret an unambiguous contract? Discuss.

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Can custom and trade usage be used to interpret an unambiguous contract? Discuss.

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HMT, already in the business of marketing agricultural products, decided to try its hand at marketing potatoes for processing. Nine months before the potato harvest, HMT contracted to supply Bell Brand with one hundred thousand sacks of potatoes. At harvest time, Bell Brand would accept only sixty thousand sacks. HMT sues for breach of contract. Bell Brand argues that custom and usage in marketing potatoes for processing allows buyers to give estimates in contracts, not fixed quantities, because the contracts are established so far in advance. HMT responds that the quantity term in the contract was definite and unambiguous. Can custom and trade usage be used to interpret an unambiguous contract? Discuss.

Explanation & AnswerSolution by a verified expert

Explanation

Company H, although new to the industry, should be aware of the industrial trade practices. The company should know that the quantities in the contract of Food P processing are just the estimates and can vary when the contract gets fulfilled. As a result, the decision will be taken in favor of Company B as Company B is eligible to change the quantity ordered at the time of contract.

Verified Answer

By rule, the quantity in the contract of Food P processing industry is taken on an estimate basis and is not fixed at the time of contract. For this reason, the custom and trade practices will be used to determine the result of this case.

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