Meaning
Actions taken by a party that go beyond the written requirements of an agreement can create new legal obligations through conduct. Recognition of extra-contractual performance occurs when a founder provides services or goods not specified in the original founding documents. This concept governs the boundary between voluntary effort and billable work in an informal startup environment.
Performance Evidence
Proving that additional work was requested and accepted requires more than a casual recollection. Any extra-contractual performance should be noted in a log or a dated communication to ensure it is not later dismissed as a gift. The record must show that the other party knew the work was being done and did not object.
Conduct Modification
Patterns of behavior between founders often overwrite the clauses in a signed agreement. When extra-contractual performance becomes the standard way of operating, the original contract might no longer be enforceable as written. This shift happens gradually and without a formal amendment.
A court looks at the actual actions of the parties to determine the new terms of their relationship. The transition from a written document to a practiced reality often leads to disputes during a separation.
Compensation Claim
Seeking payment for work outside the scope of a contract requires a clear link between the effort and a benefit received by the company. Without a record, extra-contractual performance rarely results in a successful payout. The cost of failing to document these efforts is the loss of leverage during a renegotiation.
