A reasonable and legal practice in a particular location, or among persons in a specific business or trade, that is either known to the individuals involved or is well established, general, and uniform to such an extent that a presumption may properly be made that the parties acted with reference to it in their transactions.
The term usage refers to a uniform practice or course of conduct followed in certain lines of business or professions that is relied upon by the parties to a contractual transaction. A court will apply the usage of a business when it determines that doing so is necessary to resolve a contractual dispute. Ignoring usage may result in the misreading of a document and the intent of the parties who signed it.
The law has developed different forms of usage. Local usage refers to a practice or method of dealing regularly observed in a particular place. Under certain circumstances it may be considered by a court when interpreting a document. General usage is a practice that prevails generally throughout the country, or is followed generally by a given profession or trade, and is not local in its nature or observance.
A trade usage is the prevailing and accepted custom within a particular trade or industry and is not tied to a geographic location. The law assumes that merchants are aware of the usage of their trade. TRADE USAGE supplements, qualifies, and imparts particular meaning to the terms of an agreement for the purpose of their interpretation.
The term custom and usage is commonly used in COMMERCIAL LAW, but "custom" and "usage" can be distinguished. A usage is a repetition of acts whereas custom is the law or general rule that arises from such repetition. A usage may exist without a custom, but a custom cannot arise without a usage accompanying it or preceding it. Usage derives its authority from the assent of the parties to a transaction and is applicable only to consensual arrangements. Custom derives its authority from its adoption into the law and is binding regardless of any acts of assent by the parties. In modern law, however, the two principles are often merged into one by the courts.