What is Substantial Performance?

Substantial performance is a term used in contract law that means the contract has been completed or performed to an extent that performance should be considered adequate. It arose from common law contract concepts, which were put into place to ensure that if a contract had been almost completely performed, the absence of the completion of small or insignificant details would not give one party license to breach a contract. In other words, if a person completes most or all of his responsibilities under a contract, he is entitled to payment or whatever else he was promised under the terms of the contract.

Contracts are legally enforceable promises. Contracts may contain numerous terms or conditions that the parties to the contract must meet. Completing some of the provisions of a contract may be time consuming and may take years.

Under the doctrine of substantial performance, when one party completes the contract in such a manner that performance is substantially the same as complete performance, the other party is bound to pay. In other words, if, for example, a contractor is bound to complete a contract using one type of wood but the wood is unavailable so he uses a wood that is equivalent, substantial performance will protect that contractor. It permits the contractor to enforce the contract and demand payment, although he did not perform the duties listed under the contract to the exact specifications listed in the contract.

In order for a contract to be enforced when there is substantial performance but not a complete fulfillment of all contract duties, the party requesting the substantial performance must have been unable to perform the exact duties in the contract through no fault of his own. This means a party can't simply decide to perform differently and expect substantial performance. Something beyond his control must have necessitated that he make an alteration.

Substantial performance is the opposite doctrine to the doctrine of perfect tender. In contracts that require perfect tender, the contract duties must be completed exactly as specified. Even if the result of one party's performance is substantially the same, in a perfect tender contract, that party will be considered in breach and not entitled to payment.

When one party wants to enforce a contract under the doctrine of substantial performance, he has the burden of proof. If he can demonstrate that his method of completing the contract duties was so similar as to be almost equivalent to the original duties, he is entitled to collect full payment of the contract. The other party can then try to prove he suffered damages as a result of the change and the amount of payment this party must make is reduced by any damages he proves.