PJC Business

C ONTRACTS

PJC 101.32

PJC 101.32 Trade Custom (Comment)

Evidence of trade custom may aid interpretation of ambiguous contract. The jury must determine that a custom and usage of trade existed before considering it in interpreting a contract. Texas Gas Exploration Corp. v. Broughton Offshore Ltd. II , 790 S.W.2d 781, 785–86 (Tex. App—Houston [14th Dist.] 1990, no writ); Corso v. Carr , 634 S.W.2d 804, 808 (Tex. App.—Fort Worth 1982, writ ref’d n.r.e.). This evi dence, however, may not be used to add, alter, or change unambiguous contract terms. Barrow-Shaver Resources Co. v. Carrizo Oil & Gas, Inc. , 590 S.W.3d 471, 485 (Tex. 2019) (“[E]vidence of surrounding facts and circumstances, including evidence of industry custom and usage, cannot be used to add, alter, or change the contract’s agreed-to terms.”); Miller v. Gray , 149 S.W.2d 582, 583 (Tex. 1941) (“We call atten tion, however, to the fact that evidence of custom is admissible only to explain an ambiguous contract or to add to it an element not in contravention of its terms; but such evidence is never admissible to contradict the plain unambiguous covenants and agreements expressed in the contract itself.”). If the court determines that the contract contains ambiguous language and one or more of the parties have submitted evidence of industry custom or practice related to the ambiguous language, the following instruction may accompany PJC 101.2 and PJC 101.12: You may consider evidence of that custom and usage of trade in the interpretation of a contract if you have found that a custom and usage of trade was generally known or established for a sufficient length of time to become generally known. Parties’ awareness of custom. Some Texas courts have stated that to establish a custom and usage of trade, a party must show that the custom was known to the parties to the contract or that the parties had contracted with reference to it. Texas Gas Explo ration Corp. , 790 S.W.2d at 785 (requiring finding that custom “was known to all par ties to the contract or that the parties had contracted with reference to it”); Arnold D. Kamen & Co. v. Young , 466 S.W.2d 381, 386 (Tex. App.—Dallas 1971, writ ref’d n.r.e.) (“To establish a custom and usage there must be evidence that the custom . . . was known to the parties to the contract or that the parties had contracted with ref erence to it.”). But see Energen Resources MAQ, Inc. v. Dalbosco , 23 S.W.3d 551, 556 n.1 (Tex. App.—Houston [1st Dist.] 2000, pet. denied) (“In our view, if a custom exists in any industry, those who operate within that industry may be presumed to know of it, and one asserting lack of knowledge must rebut the presumption.”). If such a showing is required, the instruction above should be changed to the following: You may consider evidence of that custom and usage of trade to aid in the interpretation of the contract if you have found that a custom and

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