Have I Breached My Contract?
Updated: 5 days ago
Performing under a contract is often a complex matter. Whether a multi-year construction project or an agreement to build complex and cutting-edge software, mistakes often happen. But do minor mistakes in the performance of a contract actually constitute a breach, especially when the customer is getting almost everything else it asked for? The simple answer is, usually not. Under most contracts, only substantial performance is necessary, rather than perfect performance. However, this rule does differ for contracts for the purchase of goods, which typically do require perfect performance. In this legal blog post, our Columbus commercial litigation lawyer will explain a breach of contract versus substantial performance.
What is Substantial Performance of a Contract?
In a not so straightforward definition, Ohio courts have held that substantial performance exists when the part underperformance does not destroy the value or purpose of the contract. Hansel v. Creative Concrete & Masonry Constr. Co., 148 Ohio App. 3d 53, 2002-Ohio-198, 772 N.E.2d 138, ¶12 (10th Dist.). In other words, “merely nominal, trifling, or technical departures are not sufficient to breach the contract.” Stonehenge Land Co. v. Beazer Homes Invests., L.L.C., 177 Ohio App. 3d 7, 2008-Ohio-148, 893 N.E.2d 855, ¶24 (10th Dist.). A court will “confine the application of the doctrine of substantial performance to cases where the party has made an honest or good faith effort to perform the terms of the contract.” Id. Another way of explaining this doctrine is to say that a party must materially violate the terms of a contract in order for the contract to be considered breached. “A material breach occurs when a party violates a term essential to the purpose of the agreement.” Ohio Educ. Ass'n v. Lopez, 2010-Ohio-5079, ¶ 15 (10th Dist.).
Importantly, unlike a breach of contract, once a party has substantially performed, the other party is not relieved from performance under the agreement. Kersh v. Montgomery Developmental Ctr., Ohio Dep't of Mental Retardation & Developmental Disabilities, 35 Ohio App. 3d 61, 62, 519 N.E.2d 665, 668 (1987) (10th Dist.).
What is a Material Breach of Contract?
Determining whether there has been a material breach of contract is similar to determining whether there has been substantial performance. If there is no substantial performance, then there is likely a breach. Ohio Courts will look at five factors when determining whether a material breach has occurred:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing. Id.
To put this into perspective, I have had many construction clients whose customers fail to pay them all or a substantial part of the contract price because of a few very minor defects or minor deviations in the materials used. So long as substantial performance was made, this does not excuse the customer from paying the contract price, less the costs due to the minor deviations in the contract.
Call our Breach of Contract Litigation Lawyer in Columbus for Assistance in Your Breach of Contract Case.
Our Columbus business litigation law firm has represented clients in a broad array of industries in breach of contract cases. This includes real estate contracts, business contracts, partnership disputes, construction contract disputes, investment contracts, and many more. Please feel free to give our firm a call so we can determine if representation is right for you.