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Substantial Performance

DEFINITION

Satisfaction of a contractual obligation.

EXPLANATION

Substantial performance refers to the situation where the actions of a contract’s violating party may be deemed complete, even if a nonessential component of the contract is missing. This doctrine assumes that the violating party has put a good faith effort into completing the project.

The purpose of substantial performance is to protect parties from being wrongfully sued for a small violation. Courts however do not have a set practice in place that is used when determining the outcome of substantial performance cases.

Substantial performance typically occurs with construction projects. For example, it is common practice for contractors to use different methods than those originally promised in order to reduce the cost of a project or the time it takes to complete the project. If the methods or products used are nearly identical to those promised and the changes are negligible, the property owner can sue however will likely lose in court.  If a contractors performance is only slightly deficient the property owner would be required to pay the agreed upon payment even if the deficiency is slightly different than what was agreed upon.

Substantially Performing as a Party

A party is considered as having substantially performed if there is no material breach. A material breach of contract is when a crucial portion of the contract has been violated which negatively effects the contracts nature as an agreement and negates any relevance of the contract itself.

A simple example of a material breach is if an individual has a handyman who was contracted to install a refrigerator and freezer in their kitchen and installs two freezers instead. The contract called for both a freezer and a refrigerator which was failed to be met, thus the handyman is in material breach of the contract and has failed to substantially perform.

Exceptions to Substantial Performance

If certain aspects of a contract in regards to performance can be met by minor changes, or if small defects or obstacles are holding out a complete performance, the individual or part y in questions is required to fulfill their obligations as this does not fall under the doctrine of substantial performance.

It is important to note that an owner does hold the right to recover any damages that has been suffered due to a contractor’s nonfulfillment of complete performance. What is considered substantial performance depends on the scenario and varies on a case by case basis.

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