Identification

• An ordinary course of business can be a transaction such as a transfer of payment that is done with normal methods for the debtor and the creditor. For example, if a payment is made and shipment is supposed to take place within 30 days as a standard practice, the 30-day period for shipment is the ordinary course of business.
  
  

Benefits

• The advantage of establishing an ordinary course of business is that it allows for identification of practices that are abnormal for a business transaction. In legal cases such as lawsuits or bankruptcies, this can serve as evidence of liability.
  
  

Significance

• Ordinary course of business is often used as a defense in bankruptcy cases. Specifically, this is used in the bankruptcy code as an exception to the trustee's recovery powers. There are a number of legal arguments involving things such as income, customs and property rights that can affect the ordinary course of business.
  
  

Expert Insight

• According to the Bernstein law firm, most ordinary course of business cases involve a dispute over what is called the objective test. This details whether or not the debtor and creditor acted within the ordinary course of business with regard to industry terms that are considered the norm for that type of business. This provides a baseline in specific cases.
  
  

Considerations

• Although the term may sound simple, establishing an ordinary course of business defense can involve a considerable amount of legal detail. While the definition comes down to ordinary business practices, the legal analysis of a particular case will generally require the services of lawyer.