CMA Foundation · Fundamentals of Business Laws and Business Communication · Sources of Law
In a commodity market in Indore, traders have for decades allowed a fixed 2% weight allowance on bulk deliveries of a grain, and no written contract mentions it. Sunil refuses to allow it in a dispute, arguing it is not written in his contract. Which is the most accurate legal position?
The allowance is a trade usage and can be read into the contract when the contract is silent, provided the usage is proved to be established, certain and reasonable. It would not override an express contrary term, and it needs no Parliamentary enactment.
- AThe allowance can never apply because only written terms bind the parties
- BThe allowance applies automatically even if the contract expressly excludes it
- CThe allowance is a trade usage that may be read into the contract where the contract is silent and the usage is proved to be established and reasonableCorrect
- DThe allowance applies only if Parliament has passed an Act on it
Explanation
A trade usage that is well established, certain and reasonable can be implied into a contract that is silent on the point. It cannot override an express contrary term, so the second option is wrong. Written terms are not the only source of obligation, and no Act of Parliament is needed for usage to operate.
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