Under the UCC parol evidence rule, which extrinsic evidence has priority in interpreting a contract for the sale of goods?

• A. Course of performance - sequence of conduct relevant to understanding the current transaction between the parties if (1) the agreement involves repeated occasions for performance by a party and (2) the other party accepts performance without objection
• B. Course of dealing - sequence of conduct concerning previous transactions between the parties that establishes a common basis of understanding for interpreting their conduct
• C. Trade usage - any practice or method of dealing in the parties' business or industry that is practiced with enough regularity to justify an expectation that it will be practiced in the instant case
• D. There is no extrinsic evidence allowed to explain or supplement terms

Answer: (A)

Under the UCC, when interpreting a contract for the sale of goods, extrinsic evidence is weighted by priority, with the highest emphasis on what actually happened under the current contract. Course of performance—the sequence of conduct in this very transaction, especially when there are repeated performances and the other party accepts without objection—shows how the parties understood and carried out their obligations, so it most strongly informs meaning. If that doesn’t settle the interpretation, the next source is course of dealing, which looks to prior transactions between the same parties to establish a common basis for understanding. After that comes trade usage, reflecting industry practices that are regular enough to expect in the case at hand. The idea that no extrinsic evidence can be used is incorrect, because the UCC expressly allows these sources to interpret terms, with course of performance taking priority over the others.