Substantial Performance Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Substantial Performance, written in plain English, along with examples of how it is used.

What is Substantial Performance?

(n) In a contract when the party involved fulfills all the major obligations which comprises the essence of the contract, such fulfillment of obligation is termed as substantial performance. It exhibits the keenness of the parties involved to fulfill he contractual obligation. For example the party supplies 99% within the stipulated date and transported the balance before due date

History and Meaning of Substantial Performance

Substantial performance is a concept in contract law where one party has fulfilled its major contractual obligations, but maybe not all obligations. The purpose of substantial performance is to promote fairness and prevent undue hardship. The doctrine of substantial performance recognizes that it is common for one party in a contract to have difficulty fulfilling every contract term, due to circumstantial challenges.

Examples of Substantial Performance

  1. In construction contracts, substantial performance may occur when a contractor finishes nearly all of the work on a project, but has a few minor deficiencies that do not prevent the client's use or benefit from the project.
  2. In sales contracts, where goods are shipped but there are slight deficiencies in the product or documentation, a finding of substantial performance may exempt the seller from any penalties or damages stemming from the deficiency.
  3. In employment contracts, an employee that has substantially performed their duties may be entitled to payment of termination or severance pay.

Legal Terms Similar to Substantial Performance

  1. Breach of contract.
  2. Frustration of purpose - where unforeseen events make it nearly impossible to perform the contract, and the contract becomes pointless.
  3. Material breach - where the standards of the contract have been disregarded so substantially that the other party is entitled to terminate the contract.
  4. Waiver - where one party waives or forgives another party's breach of the contract.