D. L. Godbey & Sons Construction Co. v. Deane , 39 Cal. 2d 429 ( 1952 )

TRAYNOR, J.

Plaintiff has appealed from a judgment for defendants entered after a demurrer to its fourth amended complaint was sustained without leave to amend.

Plaintiff alleged that it entered into a written contract to perform the cement work for a building that defendants were erecting. Under the terms of the written contract the cement work for the foundation walls and retaining walls was to be paid for at the rate of $0.76 per cubic foot, and the basis of the payment was to be determined by the actual measurement of forms. Plaintiff further alleged, ‘ ‘ That thereafter, and prior to the commencement of the performance of said work, a conference was held between plaintiff and the defendants, at which it was orally agreed and mutually stated, each to the other, that the phrase, ‘ (3) Terms op Payment : Basis of payment to be determined by actual measurement of forms’ was ambiguous and, furthermore, that it did not provide for the method of computing cubic concrete work not contained within the forms, and the defendants then and there, in exchange for their mutual covenants and agreements in that respect, and for the purpose of eliminating possible future dispute between the parties to said contract, and in order to provide for that portion of the concrete that under the plans was required to be poured outside of forms (and which ultimately was actually poured outside of forms) orally expanded and clarified said written agreement by entering into an understanding that, in order to properly arrive at the amount of cubic concrete work in foundation and retaining walls and footings upon said jobsite, whether poured within or outside of forms, the parties to said contract would calculate the amount of cubic yards of concrete actually poured, whether within forms or outside of forms, and, with respect to such classes of work only (to wit: cubic concrete work in foundations and retaining walls and footings), at the contract price of 76 cents per cubic foot, or $20.52 per cubic yard, less a deduction therefrom of the usual and customary allowance for normal shrinkage and wastage [of 3per cent], and that, in order to implement said agreement and understanding, the plaintiff would furnish to the defendants each day during the performance of said contract, copies of delivery tickets, a copy of each delivery ticket to accompany the delivery of each consignment of concrete delivered on the jobsite, such delivery tickets to show the actual cubic yards of concrete poured on the jobsite each day and until the full performance of the contract.”

Plaintiff also alleged that it had performed the contract as modified and supplied the required daily reports of deliveries and that under the terms of the contract as modified there remained due and owing the sum of $12,182.99 out of a total of $86,830.93.

Defendants contend that the alleged modification of the written contract is invalid because of lack of consideration and because it was not in writing, and that accordingly, the complaint is fatally defective in failing to alleged that any sum is due and unpaid under the terms of the written contract.

It is unnecessary to pass upon the conflicting contentions of the parties as to whether the alleged resolution of an ambiguity in the terms of the written contract would constitute sufficient consideration for the oral agreement in this case. Under the terms of the modification the method of computing the quantity of concrete was changed, and the amount actually poured on the jobsite was substituted for an amount to be determined by the measurement of the forms. If this modification had been made in writing, it is clear that it would have been a valid contract supported by adequate consideration. Since the modification was made before performance was started, the substitution of the new rights and duties based upon the new method of measurement was adequate consideration for the relinquishment of the reciprocal rights of the parties under the old. (Fleming v. Law, 163 Cal. 227, 233 [124 P. 1018] ; Gottlieb v. Tait’s Inc., 97 Cal.App. 235, 237-238 [275 P. 446]; Sass v. Hank, 108 Cal.App.2d 207, 215 [238 P.2d 652].) Moreover, plaintiff promised to provide daily reports, and both parties were relieved of the necessity of computing the volume of the forms from linear measurements. ,

Section 1698 of the Civil Code provides: “A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise.” Section 1661 provides: “An executed contract is one, the object of which is fully performed. All others are executory.” Defendants contend that under these provisions the oral modification was invalid because it was not executed. Plaintiff contends, on the other hand, that in the case of building contracts an oral modification is fully executed when the work has been completed in accordance with its terms whether or not the agreed price has been paid.

Section 1698 has a dual operation. On the one hand it invalidates oral contracts of modification that are unexecuted, and on the other hand, it validates executed agreements that might otherwise fail for lack of consideration. (Julian v. Gold, 214 Cal. 74, 76 [3 P.2d 1009].) Typical of the latter category are agreements to accept less than is due under the terms of a written contract (Julian v. Gold, supra [reduced rent] ; Sinnige v. Oswald, 170 Cal. 55, 57 [148 P. 203] [same] ; Taylor v. Taylor, 39 Cal.App.2d 518, 522 [103 P.2d 575] [reduced monthly payments under a property settlement agreement]), or to accept performance at a later date than that provided in the writing. (Harloe v. Lambie, 132 Cal. 133, 136 [64 P. 88]; Henehan v. Hart, 127 Cal. 656, 657-658 [60 P. 426].) Since in such cases the modification agreement requires no additional act or forbearance on the part of the obligor, it can only be executed to the extent that the obligee accepts performance in accordance with its terms. Accordingly, in the absence of a valid waiver of a condition (Knarston v. Manhattan Life Ins. Co., 140 Cal. 57, 62-64 [73 P. 740]; Panno v. Russo, 82 Cal.App.2d 408, 412 [186 P.2d 452] ; Bardeen v. Commander Oil Co., 40 Cal.App.2d 341, 347 [104 P.2d 875]), or facts establishing an estoppel to rely upon section 1698 (Wilson v. Bailey, 8 Cal.2d 416, 421-422 [65 P.2d 770] ; Panno v. Russo, supra), the section may only be satisfied by execution on the part of the obligee by accepting les than his due. (Stolttenberg v. Harveston, 1 Cal.2d 264, 266 [34 P.2d 472] ; Henehan v. Hart, 127 Cal. 656, 657-658 [60 P. 426]; Stafford v. Clinard, 87 Cal.App.2d 480, 481 [197 P.2d 84] ; Battaglia v. Winchester Dried Fruit Co., 32 Cal.App.2d 436, 437 [90 P.2d 111] ; Harvey v. DeGarmo, 129 Cal.App. 487, 492-493 [18 P.2d 971] ; Middlecamp v. Zumwalt, 100 Cal.App. 715, 722-725 [280 P. 1003].)

The situation is different, however, where there is consideration for the oral modification agreement. In such eases the rights and duties of both parties to the written contract are affected, and by performing the contract as modified each party will be in a position to execute the oral agreement on his side. It is necessary to determine, therefore, whether in such cases execution by one party is sufficient to allow him to enforce the modification against the other. The language of the cases is in conflict. It has been stated that an oral agreement to be executed within the meaning of section 1698 must be fully performed on both sides. (Pearsall v. Henry, 153 Cal. 314, 325 [95 P. 154, 159] ; Klein Norton Co. v. Cohen, 107 Cal.App. 325, 330 [290 P. 613] ; Walther v. Occidental Life Ins. Co., 40 Cal.App.2d 160, 166 [104 P.2d 551] ; Keeler v. Murphy, 117 Cal.App. 386, 390 [3 P.2d 950] ; Stoltenberg v. Harveston, 1 Cal.2d 264, 266 [34 P.2d 472] ; Hervey v. DeGarmo, 129 Cal.App. 487, 492-493 [18 P.2d 971].) In the Pearsall and Klein Norton cases it was held, however, that there had been a valid oral abrogation of the written contract followed by a substitution of an enforceable oral contract. In the. Keeler and Walther cases it was held that plaintiff had not performed the alleged oral agreement, and in the Stoltenberg and Harvey cases there was no consideration for the modification. On the other hand, in cases in which there was adequate consideration for the oral modification, and in which the party relying thereon had fully performed, the contract has been enforced as modified whether or not the other party had performed on his part. (Wood v. Nelson, 220 Cal. 139, 141 [29 P.2d 854] ; Katz v. Bedford, 77 Cal. 319, 323 [19 P. 523, 1 L.R.A. 826] ; Roberts v. Wachter, 104 Cal.App.2d 271, 280 [231 P.2d 534]; Nuttman v. Chais, 101 Cal.App.2d 476, 478 [225 P.2d 660]; Lacy Mfg. Co. v. Gold Crown Mining Co., 52 Cal.App.2d 568, 578 [126 P.2d 644] ; Oatman v. Eddy, 4 Cal.App. 58, 60 [87 P. 210] ; see, also, Anderson v. Johnston, 120 Cal. 657, 659 [53 P. 264] ; Stockton Combined H. & Agr. Wks. v. Glens Falls Ins. Co., 121 Cal. 167, 175 [53 P. 565]; State F. Co. v. Hershel Calif. F. P. Co., 8 Cal.App.2d 524, 529 [47 P.2d 821].) Since plaintiff has alleged an adequate consideration for the oral modification and full performance on its part under the terms thereof, it has stated a cause of action.

The judgment is reversed.

Gibson, C. J., Shenk, J., Edmonds, J., and Carter, J., concurred.