How is standard practice proven in court?

A court determines observance of standard practice as a matter of interpretation and must give the parties a reasonable opportunity to present evidence of the practice.

Does standard practice apply only to letters of credit?

No. The Restatement treats usage as habitual or customary practice that supplies meaning to contract terms when both parties knew or had reason to know of the usage.

What happens if a presentation deviates from standard practice?

An issuer must dishonor a presentation that does not appear on its face to comply strictly with the letter of credit as determined by standard practice.

standard practice

/STAN-derd PRAK-tis/phrase

Also known as: standard practices · customary practice

Written by attorneys — see sources below.

A habitual or customary practice observed by parties in a particular trade or industry.

See Our Sources· 5 primary sources

Uniform Acts

Restatements

How its tested

Common Examples

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Industry Custom in Fashion Contracts

Santiago Sanchez, a small apparel manufacturer, signed a purchase order with Skyline Construction that contained a termination clause allowing the buyer to cancel at any time. The clause reflected the power imbalance in the garment trade where buyers routinely impose such terms. When Skyline canceled after production began, Sanchez sued for breach. The court applied the standard practice of the industry to conclude that the clause was enforceable even though Sanchez had not read it.

Bank Hours Under Letter of Credit

Sentinel Security presented a draft under a letter of credit to Brotherhood Bank after 5 p.m. on the expiration date. The bank refused honor, citing its regular closing time. Carter Petroleum Products, the beneficiary, argued that the presentation complied because the documents arrived before midnight. The court measured strict compliance by the standard practice of financial institutions that regularly issue letters of credit and upheld the dishonor.

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