Understanding the Phrase Ordinary Course of Business

The phrase “ordinary course of business” can be somewhat difficult to define, as it is a legal catch-all term that refers to activities that fall within a business’s typical, everyday operations. Sometimes referred to ”usual and customary practices”, it can refer to things such as collecting and processing payments, placing orders, or manufacturing and shipping goods and services. Therefore, it is important for businesses to understand what activities fall within the definition of ordinary course of business.

Generally speaking, these are activities that are usually predictable, necessary, and customary for the type of business and industry. For instance, a restaurant will have “ordinary course of business” items such as ordering food from food distributors and selling beverages to customers. Meanwhile, an email marketing company would have ordinary course activities such as sending out marketing emails, collecting analytics, and measure customer engagement.

Unlike “extraordinary transactions” or “out-of-the-ordinary events,” activities and transactions in the ordinary course of business refer to everyday activities that are part of the business’s daily work. For example, if a restaurant that usually orders perishable food items orders 1,000 instead of 100 lemons, it is considered an extraordinary type of transactions rather than a usual and customary one.

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Understanding ordinary course of business is important from a legal and contractual perspective. In different business contracts and dealings, ordinary course of business is often referred to in order to delineate what is and isn’t included in the scope of the agreement. As such, it is important to have a concrete, specific understanding of what the phrase entails.

Key Takeaways

Overall, the phrase ordinary course of business is an all-encompassing term for activities, transactions, and operations that are routine, customary, and expected in a particular business. The specifics of the phrase may vary differently depending on the industry, as well as the company’s regular practices. This is why it is important to understand and take into consideration what constitutes ordinary course of business before entering an agreement as it can have far-reaching legal implications.

Related Legal Concepts

Understanding ordinary course of business often goes hand in hand with deductible business expense and course of employment concepts. When companies engage in doing business activities, they must distinguish between routine operations and extraordinary transactions that fall outside their principal place of business scope. These distinctions become particularly important when evaluating what constitutes legitimate business expenses versus unusual expenditures that may require special consideration.

The Bottom Line

The ordinary course of business concept serves as a crucial legal benchmark for distinguishing routine operations from extraordinary activities across all industries. This distinction impacts everything from contract interpretation to tax deductions and liability assessments. For guidance specific to your situation, always consult a qualified, licensed attorney.