Proving Substantial Performance in a Contact Dispute

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 What is a Contract Dispute?

Contracts are agreements that are legally binding between two or more parties that outline their duties and responsibilities. Typically, a contract is required to be in writing in order to be legally enforceable, including marriage contracts and contracts for an amount greater than $500.
An oral contract will be more challenging to enforce and should be avoided if possible. For a contract to be valid and enforceable, it must meet certain specific requirements, including an exchange of something of value by both parties.

In addition, the parties must have an understanding of the terms of the contract and have a mutual agreement regarding those terms. Contract disputes arise when a party or entity involved in the contract disagrees regarding a term or definition within the contract.

One common type of contract dispute is a breach of contract. A breach of contract occurs when one of the parties fails to fulfill their obligations under the terms of the contract.

A contract dispute, in general, will fall into one of two main categories, a material breach or a minor breach. A material breach occurs when a contract is irreparably broken because the breach is so great that the remainder of the contract is rendered useless and no other terms can be fulfilled.

Material breaches may also be referred to as total breaches. If a material breach of contract occurs, the breaching party is not required to fulfill their obligations under the contract.

In addition, they can sue the breaching party for damages which were caused by the breach. A minor breach of contract, also referred to as a partial breach, occurs when the breach does not affect the entire purpose of the contract and the parties are still required to carry out their obligations under the contract.

The non-breaching party, however, may still be entitled to sue the breaching party for damages. For example, a material breach may occur when an individual purchases a home and they complete all of the steps required to obtain the home but the seller refuses to provide the keys and the contract is rendered useless.

A minor breach example would be if the homeowner contracts with an electrician to install a new lighting system using a certain brand of wiring. If the electrical installs the lighting but uses a different brand of wiring than what was agreed to in the contract, it would be considered a minor breach because the overall goal of the contract was still accomplished just not according to the specific provisions.

How Can You Avoid a Contract Dispute?

The best method to avoid contract disputes is to ensure that all of the parties agree to the terms of the contract prior to signing it. All parties to the contract should have a clear understanding of all of the terms which are included.

Language that is used in the contract should clearly state all of the duties and responsibilities of the parties involved. If any technical or trade terms are used, those should be defined and clarified.

If there are any vague or ambiguous terms, or terms that may have multiple meanings, it may lead to a future dispute. Another method parties can use to avoid contract disputes is to document all aspects of their negotiations in writing.

Contract negotiations should be documented every step of the way. This may include notating:

  • The history of the offers presented;
  • The amount of product;
  • The price of the products; and
  • Other important terms.

Taking these steps can serve to minimize future disputes regarding contract terms which were forgotten. As previously noted, one of the best methods for avoiding contract disputes is to ensure that the contract is recorded in writing.

This will provide physical proof of the terms of the contract as well as clarify and detail the overall goal of the contract. Having the end goal in mind before entering into any agreement is crucial to avoiding future disputes.

What is Substantial Performance in a Contract Dispute?

Substantial performance is a legal doctrine which allows a party to require payment from the other party in a contract dispute even if their duties under the contract were only partially performed. This doctrine provides that if the performance was substantially completed or it was completed in such a way that it is actually satisfactory, payment may be required according to the contract terms.

Substantial performance is a doctrine which may allow the parties to avoid more costly and complex lawsuits for a breach of contract. It is important to note, however, that the parties may still be required to go to court if they have to determine whether the performance was substantial enough to warrant payment.

This may require the parties to present various points of evidence in support of performance. Substantial performance will not be an issue in a contract that specifies that the work must be fully completed.

What Evidence is Used When Proving Substantial Performance?

Courts have used two main standards to determine whether a party has proven substantial performance, including:

  • Whether the promisor was satisfied with the work; or
  • Whether a reasonable person would be satisfied under similar conditions.

Which standard is applied will be determined by several factors, including:

  • The relationship of the parties;
  • The subject matter of the contract;
  • The economic conditions; and
  • State or local laws.

For example, if a contract required one party to paint a house and that work was not fully completed, the court may examine whether the homeowner was satisfied with the work up to that point. This standard is used when personal taste is an issue with a project.

Or, the court may examine what a reasonable person would think about this paint job in this type of situation. This is the standard which is applied if there is an adequate industry standard for the work.

In order to prove whether these standards were met, a party may introduce numerous different types of evidence, including:

  • Market standards which govern the particular field of goods or services;
  • Comparisons with work that the parties involved previously performed or approved;
  • Expert appraisal of the work; and
  • Fair market values of products as well as resale prices.

Because every contract is different and the prices of goods and services typically change over time, every contract claim may be reviewed on a case-by-case basis when it comes to substantial performance. It may be helpful to consult with a contract lawyer for evaluation and representation in court.

What Remedies are Available for a Contract Dispute?

Generally, there are two main categories of remedies for contract disputes, legal remedies and equitable remedies. Legal remedies may include:

  • Compensatory damages;
  • Restitution; and
  • Liquidated damages.

Certain contracts may include a liquidated damages clause, which determines, in advance, the amount of damages that will be paid should one party breach the contract. The parties to the contract will agree upon the damages figure during contract negotiations.

Equitable remedies are legal remedies which allow the non-breaching party to recover monetary damages, which may include actions that the court orders for the purpose of resolving the dispute. This generally means the parties are required to take certain actions in order to correct errors or perform their contractual duties.

Should I Hire a Lawyer for a Contract Dispute Involving Substantial Performance?

Proving that substantial performance occurred under a contract can involve numerous determinations and analyses of evidence presented. It may be helpful to consult with a contract lawyer for assistance with issues such as substantial performance of contract duties.

Your attorney can advise you of the applicable laws in your area. In addition, your lawyer can explain your legal rights and obligations under your contract.

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