“Ordinary course of business” shows up everywhere.
It’s in operating agreements, stock purchase agreements, credit documents, consent rights, covenants, earnouts, and interim operating covenants between signing and closing. Everyone nods at it. Almost no one defines it with enough care.
Ordinary Course Is a Comparison, Not a Label
In deals, “ordinary course” doesn’t mean reasonable or defensible. It means consistent with how the business actually operated before.
That comparison point matters:
• Is it the last 12 months?
• The last full fiscal year?
• Pre-distress operations?
• Pre-growth operations?
If the business is seasonal, growing quickly, or coming out of a rough period, “ordinary course” becomes ambiguous fast.
The Concept Shows Up When Risk Is Highest
Ordinary course matters most:
• between signing and closing,
• when a buyer wants stability but the business needs flexibility,
• or when consent thresholds are triggered unexpectedly.
A seller may think they’re running the business responsibly.
A buyer may see the same action as a covenant breach.
Both are often acting in good faith.
Courts Look Backward, Not Forward
When disputes arise, courts tend to ask:
“Is this how the company usually behaved?”
They are less interested in:
• whether the action was smart,
• whether it was necessary, or
• whether management believed it was justified.
That backward-looking lens surprises people who treated “ordinary course” as a business judgment standard instead of a historical one.
Boilerplate Is Where the Trouble Starts
Most problems come from copying a generic clause and assuming it will fit later:
• No carveouts for growth initiatives
• No thresholds for expenditures
• No clarity on hiring, pricing changes, or customer concessions
Those gaps rarely matter—until they matter a lot.
The Quiet Fix
The solution isn’t over-lawyering. It’s selective specificity:
• define reference periods,
• carve out known deviations,
• and align the clause with how the business actually runs, not how people wish it ran.
Ordinary course isn’t exotic.
But in deals, it’s one of the most common places where expectations quietly diverge—and where disputes begin.
