Conduct
The actions or behavior of a party that can create, modify, or waive contractual obligations - and may substitute for an express written agreement.
While straightforward in theory, many businesses fail to actively track obligations tied to this concept - often resulting in missed deadlines, unintended renewals, penalties, or loss of contractual rights.
US Law · For business owners and foundersWhat is a Conduct?
In contract law, "conduct" refers to the actions, behavior, and course of dealing of the parties - as distinct from express written or oral statements. Courts look at conduct to determine whether a contract was formed, what its terms are, and whether a party has modified or waived their contractual rights.
Under UCC §2-204, a contract for the sale of goods may be formed in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of a contract. This means parties can accidentally create binding contracts by simply acting as if one exists.
Conduct after contract formation is equally significant. A party's repeated acceptance of non-conforming performance, late delivery, or partial payment without objection may constitute a course of performance that modifies the original contract terms - even if the written contract says it cannot be modified except in writing.
In practice, many teams rely on a contract expiry tracking system to stay on top of dates and obligations tied to clauses like this.
Key Elements
Contract Formation by Conduct
Parties who begin performing under an agreement - accepting deliveries, making payments, providing services - may be found to have formed a binding contract even without a signed document.Modification by Conduct
A consistent pattern of deviating from contract terms - and the other party accepting those deviations - can modify the original contract terms. Courts look at course of performance to interpret the parties' actual agreement.Waiver by Conduct
Failing to enforce a contractual right repeatedly can constitute a waiver of that right by conduct. Accepting late payments for months without protest may waive the right to demand strict payment timing.Course of Dealing vs. Course of Performance
Course of dealing (conduct before this contract) and course of performance (conduct under this contract) are both used to interpret ambiguous terms. Course of performance carries more weight because it reflects how the parties actually applied their agreement.Real-World Example
A supply contract requires weekly invoices. For six months, the supplier sends monthly invoices and the buyer pays them without objection. The buyer then refuses to pay a monthly invoice, claiming it violates the weekly invoicing requirement.
The course of performance - six months of monthly invoicing accepted without complaint - likely modified the weekly requirement by conduct. A court may find that the parties' actual practice replaced the written term. The buyer waived the weekly invoice requirement through their conduct.
This is why many businesses adopt automated deadline tracking to ensure no critical dates are missed before they pass.
Sample Clause Language
No Modification by Conduct ClauseWatch Out For
Performing before a contract is signed
Starting work before signing creates a contract-by-conduct. If the deal later falls apart, you may be bound by oral or implied terms rather than the negotiated written terms. Always sign before starting.Accepting non-conforming deliveries
Every non-conforming delivery you accept without written objection modifies the standard your vendor must meet. Protect yourself by issuing written acceptance under protest whenever you accept deficient performance.Don't let conduct deadlines catch you off guard
Key dates tied to conducts - renewal windows, expiry cutoffs, notice periods - can easily slip through the cracks when tracked manually. Missing them triggers automatic extensions, penalties, or lost rights. ExpiryEdge tracks every critical deadline and sends automated reminders before they're due - so nothing slips.
Instead of relying on spreadsheets or manual follow-ups, a centralized renewal reminder system ensures every deadline is visible, tracked, and actioned automatically.
How to Use This in Your Favor
Include a robust no-oral-modification clause
Explicitly state that the contract cannot be modified except in writing. This reduces the risk of inadvertent modification by conduct, though courts may still find modification in extreme cases.Object to every deviation in writing
When a counterparty deviates from contract terms - even slightly - send a contemporaneous written objection. This prevents a course of performance from developing that modifies your rights.Related Terms
Frequently Asked Questions
Can conduct override a written contract?
Yes, in some circumstances. Under the UCC, course of performance can explain or supplement written terms, and consistent conduct can effectively modify them. Common law also recognizes modification by conduct in certain circumstances, particularly when both parties act consistently with different terms.
What is the difference between conduct creating a contract and a gentleman's agreement?
A contract formed by conduct is legally binding and enforceable in court. A gentleman's agreement is an informal understanding that the parties intend to be non-binding. The line between them can be blurry - courts look at whether both parties objectively appeared to agree to enforceable terms.