Does local custom or trade usage fill the gaps in a contract?

Two distinct jobs in one sentence

The article gives custom two separate functions, and they are worth keeping apart. The first is interpretative: where a term is ambiguous, local usage helps decide which of the possible meanings the parties intended. If a trade uses a word in a particular way, the contract is read the way people in that trade read it. The second is supplementary: where the contract is simply silent on a point that agreements of that kind ordinarily cover, custom supplies the missing term. Silence, in other words, is not automatically a gap the law refuses to fill.

"Ordinarily established" is a real threshold

Custom does not mean whatever one side has always done, or what most people in your barangay assume. To be relied on, the usage must be the ordinary and settled practice of the place or the trade — general, uniform, and known to those who deal in that line of business, so that both parties can fairly be taken to have contracted against it. A practice that is occasional, disputed, or peculiar to one company is not custom. And because custom is a matter of fact rather than something a court simply knows, the party invoking it has to prove it, usually through people who actually work in the trade.

Custom cannot beat the written word, or the law

This is the boundary people cross most often. If the words of the contract are clear, interpretation stops there and custom has nothing to operate on — you cannot use "but that is how it has always been done" to rewrite a term you now regret. Custom also yields to law. A usage contrary to a mandatory provision, or contrary to public order, morals or good customs, has no effect no matter how entrenched it is in a locality. The practical order is straightforward: read the contract first, then the law, and only then reach for what the trade ordinarily does.

What this means when you are the one with a gap

If your agreement is silent on delivery time, packaging, who bears the cost of hauling, or when payment falls due, do not assume the omission means nothing is owed. The ordinary practice of the trade may already answer the question, and the other side may be entitled to rely on it. The reverse is equally true — if the customary practice favours you, it is evidence worth gathering: prior dealings between the same parties, invoices from other suppliers in the same market, and the testimony of people in the trade. The cheaper protection, of course, is to write the term down. Custom is a repair mechanism for contracts that were drafted in a hurry, and repairs are always more expensive than doing it properly at the start.

Cases citing this provision

These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.

• Tomas K. Chua vs. Court of Appeals, et al, G.R. No. 119255, April 9, 2003 — read the decision on LawPhil →

Related provisions

• Civil Code, Article 1376 — Usage and Custom