The call usually comes in the same way. A business owner has a customer who is 90 days behind, a signed contract that says payment is due in 30, and a late fee clause that has never once been invoiced. The owner wants to know how fast the contract can be enforced. The honest answer starts with a different question: which contract? The one that was signed, or the one the parties have actually been living under for the past eight months?

In California, a written contract can sometimes be changed without anyone signing anything. It can be changed by what the parties do, what they accept, and what they let slide. After 25 years of litigating business disputes in Pasadena and greater Los Angeles, I can tell you that waiver by conduct is one of the most common reasons a good contract claim comes back weaker than the owner expected.

How a Signed Contract Gets Rewritten Without a Signature

California Civil Code section 1698 is the starting point. A written contract can be modified by a later written agreement. It can also be modified by an oral agreement to the extent that agreement has actually been performed. And unless the contract expressly says otherwise, it can be modified by an oral agreement supported by new consideration. The statute also preserves the doctrines of waiver and estoppel, which is where most of the trouble lives.

Waiver is the intentional giving up of a known right. That sounds like something you would have to say out loud. It is not. Courts can find waiver from conduct that is inconsistent with an intent to enforce the right. Accept late payments month after month without a word, and a court may conclude you no longer treat the payment deadline as a deadline. Let the customer expand the project by text message instead of the written change order the contract requires, and the scope of work may be whatever the texts say.

Estoppel works from the other direction. If your conduct led the other side to reasonably believe a term would not be enforced, and they relied on that belief, you may be barred from enforcing it even if you never intended to give it up.

The Late Fee You Never Charged

The late fee clause is the classic example. The contract says 1.5 percent per month on overdue balances. For the first year the customer pays on time. Then payments start landing at day 45, then day 60. The owner sends a friendly reminder, gets paid, and never adds the fee. This happens a dozen times.

Now the relationship has gone bad and the owner wants every dollar the contract allows. The customer’s lawyer will argue that twelve months of unbilled late fees established a course of dealing in which the fee simply did not apply. Whether that argument wins depends on the facts, but the owner has handed the other side a real defense that did not exist on the day the contract was signed.

The Change Orders That Happened by Text

Construction contracts, software development agreements, and consulting engagements almost always require written change orders. The rule exists for a reason. Scope creep is where disputes are born.

In practice, the client calls, asks for one more thing, and the owner says yes to keep the relationship warm. The extra work gets done. The client is happy. Then the invoice arrives, the client disputes the added charges, and everyone reaches for the contract. The contract says no written change order, no additional payment. The owner now has to argue that the parties abandoned their own change order requirement by conduct, which is a harder position than simply having the signed change order in the file.

It cuts the other way too. A client who lets the contractor deviate from the specifications without objection may find it difficult to later claim the deviation was a breach.

What About the Anti-Waiver Clause?

Most commercial contracts contain a sentence saying that failure to enforce any provision is not a waiver of that provision or of any future breach. Business owners tend to assume that sentence solves the problem. It helps. It does not solve the problem.

California courts have held that an anti-waiver clause can itself be waived by conduct. The clause raises the bar for the other side, and it is far better to have it than not, but a long and consistent pattern of non-enforcement can overcome it. The same is true of clauses requiring all modifications to be in writing. Section 1698 gives those clauses real weight, but performance and reliance can still carry the day.

Why This Matters Before the Dispute, Not After

By the time a client sits down in my office with a customer 90 days behind, the course of dealing is already established. I can build the best case available on those facts, but I cannot un-accept eight months of late payments.

The owners who come out of these disputes whole are the ones who treated every exception as an exception. When they granted extra time, they said so in writing and said it was a one-time accommodation. When they did extra work, they confirmed the added scope and price by email before starting, even if the formal change order came later. When they let a fee go, they said they were letting it go this time and reserving the right to charge it next time.

None of that requires a lawyer on every phone call. It requires a habit, and it usually requires someone with experience to set up the habit in the first place, because the instinct of most good business people is to be accommodating and keep the paperwork light.

If the Relationship Has Already Soured

If you are past that point and the customer is already in default, do not assume the contract you signed is the contract a court will enforce, and do not assume it is not. The analysis depends on what was said, what was accepted, and what was written down along the way. Get those communications organized before you send a demand, because the demand letter itself can waive or preserve rights depending on how it is written.

If you are dealing with a customer or vendor who has stopped performing, and you are not sure how much of your contract is still enforceable, contact the Law Offices of Scott D. Wu at (626) 799-1858 for a consultation.

This article is for general information and is not legal advice for any specific situation.