Performance, Substantial Performance, & Breach of Contract - Explained
What Does it Mean to Perform or Breach a Contract?
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What is performance of a contract?
Performance of a contract relieves a person from further duties under the contract. There are three levels of performance: Complete Performance, Substantial Performance, and Breach.
Next Article: What is a Divisible Contract? Back to: CONTRACT LAW
What is Complete Performance of a Contract?
Complete performance by a party means that the contracting party has fulfilled every duty required by the contract. A completely performing party is entitled to a complete performance by the other party.
- Example: I enter into a contract to build a house for Ellen. I build the house and complete all of the material and non-material requirements of the contract.
What is Substantial Performance of a Contract?
Substantial performance of a contract means less than complete performance; but, the level of performance is sufficient to avoid a claim of breach of contract. More specifically, it means that a party has performed all material elements of the contract, but there are non-material aspects left uncompleted.
- Note: The other party may be entitled to seek offset or recovery from the substantially performing the party for the aspects of the contract not completed.
- Example: I enter into a contract to build a house for Ellen. I build the house, but fail to paint the interior the color described in the contract. This contract is substantially performed and does not give rise to an action for breach. Ellen may, however, recover or offset the cost of painting the walls when paying me.
What is Breach of a Contract?
Any performance that is not complete or substantial performance is a material breach. This entails performance at a level below what is reasonably acceptable. The materially breaching party cannot sue the other party for performance and is liable for damages to the other party for the breach.
- Example: I enter into a contract to build a house for Ellen. I distracted by another contract and make material errors in laying the foundation. It causes the house not to meet standards and pass inspection by the building inspector. In this case, I have breached the contract by failing to perform a material duty under the agreement.
How do you feel about the concept of substantial performance? Do you believe that failure to perform certain duties under a contract should not constitute a breach? Why or why not?
Missy enters into a contract to perform auditing functions for ABC Corp. She does reconciliation of many of the accounts, which takes substantial time. She is satisfied that the books are accurate, so she skips performing many of the key tasks required of external auditors. What is the status of Missy's duties under the contract?
- Complete performance of a contract means carrying out the primary (material) requirements of the contract. However, a party may partiality or substantially perform their obligations and avoid breach. This means that the performance is insufficient but it does not relieve the other party from a duty to perform their side of the bargain. Thought, that party may seek damages or a right of offset of payment for the failure to completely perform. The court will only award such damages after calculating the price of the contract minus the cost the aggrieved party will incur to remedy the party that was not performed as per the facts of the original contract.
- What is a Unilateral Contract vs a Bilateral Contract?
- What is an Express Contract vs an Implied Contract?
- What are the requirements to form a Contract (Offer, Acceptance, Consideration)?
- What is an Enforceable Contract vs. a Valid Contract?
- What is a Void Contract vs a Voidable Contract?
- Adhesion Contract
- What is Mental Capacity to contract?
- What is the requirement of a Lawful Purpose?
- What are common types of Voidable Contract?
- When does an offer to contact terminate?
- Counterparty Definition
- Mirror Image Rule?
- Rule for Sale of Goods
- Silence is Not Acceptance?
- Mailbox Rule
- Shrink-wrap Agreement Definition
- Click-Wrap Agreement Definition
- What is Consideration?
- What is Promissory Estoppel?
- When is a contract required to be in writing Statute of Frauds?
- What type of writing satisfies the statute of frauds?
- Exceptions to the Statute of Fraud
- Documents Under Seal
- Who Can Sign Contracts on Behalf of a Company?
- E-Sign Act
- Privity of Contract
- Who are third-party beneficiaries to a contract?
- What is assignment and delegation of a contract?
- What is Performance, Substantial Performance, and Breach of a contract?
- What is performance of a Divisible Contract?
- When is a party's duty of performance discharged?
- What is tender performance of a contract?
- What are Impossibility and Impracticability
- What is a Frustration of Purpose?
- Acceleration Clause (Contracts) Definition
- What is Efficient Breach?
- Organization of a Contract
- Contract Representations & Warranties
- Contract Covenants
- What rules does a court follow in interpreting a contract?
- What is the Parol Evidence Rule?
- What is a complete integration vs a partial integration?
- Exceptions to the Parol Evidence Rule
- Patent and Latent Ambiguity in a Contract
- Service Level Agreement Definition
- Offtake Agreement