Contract Law: What is Substantial Performance?
Substantial performance is a contract law doctrine that allows parties to be paid under a contract and to retain the benefit of a contract even if they technically failed to comply with the precise terms of the agreement.
In other words, substantial performance, while it is not full and complete performance, is sometimes enough to satisfy an agreement—so long as a good faith attempt at performance was made and the deviation does not amount to a material breach of the agreement.
Precise Performance May Not Be Required to Satisfy the Contract
Under U.S. contract law, there is a doctrine known as the ‘perfect tender rule’. Under this doctrine, a buyer of goods has the right to insist on a delivery of goods that conform to precise specifications. In many circumstances, perfect match is extremely important. As an example, if a company is ordering replacement parts for its machinery, even a small deviation in the goods could render them completely useful. In this scenario, substantial performance is not good enough to satisfy the terms of an agreement.
However, there are exceptions. As an alternative to the perfect tender rule, the doctrine of substantial performance holds that, in some circumstances, precise performance is not required to satisfy a party’s obligations under an agreement. The principal is as follows: when a party’s performance is slightly deficient, but in a manner that is not material to the agreement, their obligations have been satisfied. The key point is that any deviation must be non-material in nature. A material breach is not substantial performance.
To be clear, the counterparty will retain the right to deduct damages from payment to account for a non-material breach. Any deduction on the grounds of non-precise performance must be reasonable given the nature of the agreement and the extent of the deficiency in question.
The Limits of Substantial Performance: The Language of the Agreement Always Matters
In contract law, the specific language of the agreement is always important. In many circumstances, substantial performance may simply not be applicable. For example, if an agreement clearly states “specific and complete performance is required”, then substantial performance will not be sufficient to satisfy the agreement. With this type of contract language, the parties have clearly bargained for a specific type of delivery.
There are other limits to the substantial performance as well. For example, this legal doctrine is not meant to excuse easily correctable mistakes. As an example, if the contract calls for the delivery of 100 chairs and only 99 chairs are actually sent, the seller should send a replacement to fix the issue.
Discuss Your Case With Our West Palm Beach Contract Litigation Attorneys Today
At Pike & Lustig, LLP, our West Palm Beach business litigation attorneys represent individuals and companies in breach of contract claims. If you have questions about substantial performance or any related contract law issue, we can help. To arrange a confidential review of your case, please contact our West Palm Beach office or Miami office right away.