Trade usages

What it means

Trade usages are established practices in a particular industry or between specific parties that apply unless the contract excludes them or they conflict with the law. The Commercial Code takes them into account when interpreting contracts and filling in matters the contract does not expressly address.

A distinction is made between general usages commonly observed in an industry and an established course of dealing between the parties that has arisen from repeated transactions. If a company has invoiced a customer monthly with twenty-day payment terms for years, that may be their established practice even without a written contract.

Some usages are codified internationally. The best-known example is the Incoterms rules issued by the International Chamber of Commerce, which define precisely who arranges transport, insurance and customs formalities and when risk passes.

How it works in practice

Trade usages are considered when interpreting unclear contract terms. If a contract requires delivery on a working day without specifying the time, it may be interpreted according to what is customary in the industry. Important terms should therefore be stated expressly rather than left to usage.

In international trade, referring to codified usages helps prevent disputes. Stating an Incoterms rule with a place and version, for example FCA Bratislava Incoterms 2020, removes doubt about who pays for transport and who bears the risk of damage.

Usages and established practice can also be reflected in general terms and conditions. A party that wishes to depart from established practice should notify the other side in advance; otherwise the other party may object that it relied on the previous approach.

What to watch out for

Usages cannot override mandatory statutory provisions or what the parties have expressly agreed. In a dispute, the party relying on a usage must prove that it exists and that the parties knew or ought to have known of it, which is not always easy.

An established practice can arise unnoticed, for example when a company repeatedly tolerates late payments without sanctions. A later claim for late payment interest or penalties may then be challenged by the other side. It is wise to enforce rights consistently or to state expressly that tolerance is an exception.