The written contract may say one thing, but months or years of doing business differently can complicate the dispute. Business relationships do not always operate exactly as written in contracts. A contract may require payment within 30 days, but one party routinely accepts payment after 60.
An agreement may require written approval before additional work is performed, but the parties regularly approve changes by text message. A distribution agreement may limit sales to a particular territory, while both sides knowingly operate outside that territory for years. Or a contract may require all modifications to be in writing even though the parties repeatedly change their arrangement through emails, conversations, and conduct.
When the relationship is working, these informal practices may cause little concern. When the relationship breaks down, however, they can become central to a breach-of-contract lawsuit. One side may point to the written agreement and argue that its terms control. The other may respond that the parties modified the agreement, waived strict compliance with certain provisions, or established a course of performance inconsistent with the contract’s original language. The result can be a dispute not only about what the contract says, but what agreement the parties were actually operating under.
The Written Contract Is the Starting Point
In a commercial dispute, the written agreement is ordinarily the starting point. The contract may establish payment obligations, deadlines, performance requirements, approval procedures, termination rights, and other terms governing the parties’ relationship. Those provisions can provide powerful evidence of what the parties agreed to do, but the analysis may not always end with the written document.
Businesses sometimes depart from their written agreements as circumstances change. A temporary accommodation can become routine. An informal approval process can replace the formal procedure described in the contract. The parties may change pricing, deadlines, responsibilities, or other aspects of their relationship without formally amending the original agreement. When litigation arises, the parties’ conduct after signing the contract can therefore become important.
Course of Performance Can Reveal How the Parties Operated
How the parties repeatedly performed under an agreement can provide important evidence about their contractual relationship. Consider a contract requiring a distributor to submit purchase orders by the first day of every month. For three years, the distributor routinely submits them between the fifth and tenth day, and the supplier accepts and fulfills every order without objection. If the relationship deteriorates and the supplier suddenly claims those late submissions constitute a material breach, the parties’ history may become relevant.
The distributor may argue that the parties’ consistent course of performance demonstrates how they understood or applied the requirement in practice. This does not mean that repeated conduct automatically rewrites every contractual provision. But in some disputes, what the parties consistently did can become important evidence alongside what the contract originally said.
A Party May Waive Strict Compliance With a Contractual Right
Waiver can become an important issue when one party repeatedly accepts conduct that does not comply with the contract. Suppose an agreement requires payment within 30 days. For several years, the customer pays between 45 and 60 days, and the vendor consistently accepts those payments without declaring a default or insisting on strict compliance. If the vendor later attempts to terminate the agreement immediately because a payment arrived on day 45, the customer may argue that the vendor previously waived strict enforcement of the 30-day requirement.
Waiver disputes depend heavily on the facts and the parties’ communications. In litigation, invoices, payment records, notices, emails, and other communications may become important evidence of whether a party knowingly accepted noncompliance or continued to insist on its contractual rights.
Informal Communications Can Become Evidence of Modification
Businesspeople frequently modify their working relationships without thinking of the change as a formal contract amendment. An executive may email agreement to a new delivery schedule. A project manager may approve additional work through text messages. The parties may exchange emails that establish a different pricing structure or change their respective responsibilities. Years later, those communications may become exhibits in a breach-of-contract lawsuit.
One party may argue that the communications show the parties modified the agreement. The other may contend that the emails or texts were informal discussions that never changed the underlying contract. The language of those communications and what happened afterward can therefore matter. An email stating, “We agree that beginning October 1 the new monthly price will be $25,000,” may carry different significance from an informal conversation about a possible future pricing change. If the parties then perform under the new arrangement for an extended period, that conduct may also become part of the modification argument.
Oral Agreements Can Create Complicated Disputes
Some of the most difficult contract disputes involve alleged oral modifications. One party may claim that the executives met and agreed to change a deadline, payment structure, scope of work, or another important term. The other may deny that the conversation occurred or dispute what was said. Unlike a written amendment, an oral agreement may leave no document that clearly establishes its terms.
The litigation may therefore turn on witness testimony and surrounding evidence. Did the parties begin performing differently immediately after the alleged conversation? Did they send emails afterward referring to the new arrangement? Did invoices change? Did internal records reflect the revised terms? The credibility of the people involved can also become important. An alleged oral modification can therefore transform what appears to be a straightforward contract dispute into a much more fact-intensive case.
No-Oral-Modification Provisions Matter
Many commercial agreements try to prevent these problems by requiring modifications in writing. A contract might state that it “may not be amended or modified except by a writing signed by both parties.” These no-oral-modification provisions matter when one side later claims a conversation or informal understanding changed the agreement.
But such a provision does not necessarily eliminate every dispute about subsequent conduct. The parties may disagree about whether there was a sufficient writing, whether emails or other communications satisfy applicable requirements, whether a party waived certain rights, or whether the parties’ conduct has other legal significance. A court may therefore need to examine both the contractual language and the evidence concerning what happened afterward.
Non-Waiver Provisions Can Complicate the Analysis
Commercial contracts also frequently contain non-waiver provisions stating that a party’s failure to enforce a contractual right on one occasion does not prevent it from enforcing that right later. For example, a contract may provide that accepting a late payment does not waive the right to require timely payment in the future. Such provisions can strengthen a party’s argument that its prior flexibility did not permanently change the agreement.
Disputes can still arise, however, over the extent and consistency of the parties’ conduct, what was communicated, and whether the party later provided notice that it intended to insist upon strict contractual compliance. The court will evaluate the contract and the parties’ behavior together.
Evidence of How the Parties Actually Did Business Can Become Critical
When the written agreement and the parties’ conduct appear inconsistent, the evidence surrounding the business relationship can become particularly important. Emails and text messages may show that the parties discussed or approved changes. Invoices and payment records may demonstrate how payment terms actually operated. Purchase orders may reveal changes in pricing or quantities. Project-management systems may document approvals and deadlines. Internal communications may show how each company understood the arrangement.
Witness testimony can also matter. People who negotiated the changes, approved deviations, issued invoices, managed the relationship, or communicated about performance may eventually be asked to explain what happened. This is one reason businesses should preserve communications and records when a contractual relationship begins to deteriorate.
When Informal Business Practices Become Contract Litigation
A written contract can provide important certainty in a commercial relationship. But that certainty can erode when the parties spend months or years operating differently from what the agreement requires. When litigation arises, one side may rely on the written terms while the other relies on the parties’ actual conduct. Resolving the dispute may require examining the contract, amendments, emails, text messages, payment history, invoices, internal records, and the parties’ course of performance to determine what rights and obligations remained enforceable.
At Alisme Law, we represent businesses in breach-of-contract and commercial litigation throughout New York. When the parties’ conduct does not match the written agreement, we help our clients evaluate the contractual language, develop the evidentiary record, and determine how the parties’ actual business practices affect the litigation strategy.
Contact us to schedule a confidential case evaluation at 917-540-8432.
This article is for informational purposes only and does not constitute legal advice.