Contracts: Performance and Breach

Contracts are built on a simple exchange: each party promises to do something, and the law enforces those promises when the time comes to perform. Most disputes arise not from whether a contract exists, but from whether performance was required, whether it was properly delivered, and what happens when it is not. Understanding performance and breach means understanding the conditions that trigger duties, the difference between serious and less serious failures, and how the law treats a party who signals in advance that they will not perform.

What “Performance” Means in Contract Law

Performance is the fulfillment of a contractual duty according to the contract’s terms. It can involve paying money, delivering goods, completing services, or refraining from certain conduct. Performance is judged against what the contract requires, including:

• Timing: whether performance is due on a specific date or within a reasonable time.
• Quality and quantity: whether the goods or services match agreed specifications.
• Manner of delivery: whether performance occurred in the agreed form and place.
• Cooperation: whether each party provided what was necessary for the other to perform (access to a site, approvals, information, etc.).

In practice, perfect alignment with every detail is not always required. Many contracts are performed in a way that is “good enough” to satisfy the bargain, with monetary adjustments for small deviations. That is where the doctrine of substantial performance becomes important.

Conditions: When Duties to Perform Arise

A condition is an event that must occur before a contractual duty becomes due, or an event that brings an existing duty to an end. Conditions matter because a party may not be in breach if their duty never arose in the first place.

Express Conditions

An express condition is stated in the contract, often using words like “if,” “on condition that,” “provided that,” or “subject to.” For example:

• A buyer’s obligation to purchase is “subject to” financing approval.
• A contractor is paid “upon” final inspection approval.

If an express condition does not occur, the related duty generally does not become enforceable. This can lead to harsh outcomes, which is why disputes often focus on whether the contract truly created a condition or merely described a promise.

Conditions Precedent and Conditions Subsequent

• A condition precedent must occur before a duty arises. If it does not happen, performance is not due.
• A condition subsequent ends a duty that has already arisen. If it occurs, the duty is discharged going forward.

These categories help structure analysis, but the practical question is the same: did the triggering event happen, and what does the contract say should follow?

Constructive Conditions and “Order of Performance”

Even when the contract does not use explicit conditional language, courts often treat performances as interdependent. In many exchanges, one party’s performance is a constructive condition of the other’s duty. A common example is payment in exchange for delivery: the duty to pay is typically conditional on tender of delivery, and the duty to deliver may be conditional on payment, depending on the contract structure.

This interdependence is why breach analysis frequently turns on who was required to perform first and whether the other party’s nonperformance was justified.

Breach of Contract: The Basic Idea

A breach occurs when a party fails to perform without a legally valid excuse when performance is due. Breach can take many forms:

• complete failure to perform
• late performance
• defective or incomplete performance
• refusal to perform
• interference with the other party’s performance

Not every breach has the same consequences. The law distinguishes between material breaches that undermine the contract’s core purpose and minor breaches that can be remedied without excusing the other party’s remaining duties.

Material vs Minor Breach

Material Breach

A material breach is a failure that goes to the essence of the bargain. When a breach is material, the nonbreaching party is generally entitled to treat the contract as terminated and may be excused from further performance. Material breach is also the kind of breach that typically justifies seeking full damages for the harm caused by nonperformance.

While phrasing varies across contexts, materiality commonly turns on practical factors such as:

• whether the nonbreaching party received the main benefit of the contract
• whether the breaching party can or will cure the failure
• how much of the contract has been performed
• the extent and seriousness of the deficiency
• whether the breach was willful or in good faith

Example: If a supplier delivers entirely different goods than the contract specifies and the difference defeats the buyer’s planned use, that is more likely material than a small packaging defect.

Minor Breach

A minor breach (sometimes called an immaterial breach) is a deviation that does not substantially defeat the contract’s purpose. The nonbreaching party generally must continue performing but can seek damages to compensate for the deficiency.

Example: A service provider completes work on time, but a small portion does not match an aesthetic specification. The customer may be entitled to the cost of correction, but not to refuse payment altogether if the core service was delivered.

The practical significance is leverage. A party faced with a minor breach typically cannot walk away from the deal without risking being treated as the breaching party themselves.

Substantial Performance: When “Almost” Counts

Substantial performance is the doctrine that allows a party who has performed most of their obligations in good faith to enforce the contract, even if there are minor defects or omissions. The nonbreaching party is still protected through damages, usually measured by the cost to fix the defect or the diminished value caused by the deficiency.

Substantial performance is most often discussed in construction and service contracts, where perfect compliance with every specification is difficult and where the completed work still delivers the essential benefit.

Key points about substantial performance:

• It does not excuse major failures.
• It is tied to good faith. A party who deliberately substitutes cheaper materials or ignores key specifications is less likely to receive the benefit of the doctrine.
• It preserves the deal: the performing party can recover the contract price minus the amount needed to remedy the remaining issues.

Substantial performance also interacts with conditions. If the contract makes a particular requirement an express condition of payment, substantial performance may not overcome that condition. That is why careful drafting of payment and acceptance terms matters.

Anticipatory Repudiation: Breach Before the Due Date

Anticipatory repudiation occurs when a party clearly indicates, before performance is due, that they will not perform. The repudiation can be a direct statement (“We will not deliver”) or conduct that makes performance impossible (for example, selling unique promised goods to someone else).

The key is clarity. A vague complaint, request to renegotiate, or expression of doubt is not necessarily repudiation. The signal must be definite enough that a reasonable person would understand it as a refusal or inability to perform.

Legal Effects of Anticipatory Repudiation

When anticipatory repudiation occurs, the nonrepudiating party typically has choices:

• treat the repudiation as an immediate breach and pursue remedies
• suspend their own performance to avoid wasting resources
• in some cases, await performance for a reasonable time, particularly if there is a chance the repudiating party will retract

Retraction may be possible if it occurs before the nonbreaching party materially changes position in reliance on the repudiation. Once the nonbreaching party has acted on the breach, the repudiating party generally cannot unilaterally undo it.

Anticipatory repudiation is especially important in long-term supply agreements, large projects, and staged performances. It allows the nonbreaching party to respond early rather than waiting for a missed deadline that is already predictable.

Practical Takeaways for Managing Performance and Breach

Draft with Conditions in Mind

Many disputes start with whether a requirement is a condition or a promise. If a party intends that a specific event must occur before payment or performance is due, the contract should say so plainly. If the intent is more flexible, avoid rigid conditional language that could create an all-or-nothing outcome.

Document Performance and Deficiencies

Materiality is often fact-driven. Clear records of what was delivered, what was missing, and how that affected the bargain can determine whether a breach is treated as material or minor.

Cure and Communication Matter

If performance is defective, prompt cure efforts can shift a dispute from contract-ending territory into a manageable adjustment. Likewise, parties should be careful with communications when deadlines slip. A careless email that sounds like a refusal to perform can be argued as anticipatory repudiation.

Know When You Can Stop Performing

Stopping performance is powerful but risky. If the other side’s breach is minor, walking away can expose the nonbreaching party to liability. The safer course is often to continue performance while preserving claims for damages, unless the breach is clearly material or the contract expressly allows suspension.

Conclusion

Performance and breach doctrines translate contractual language into real-world consequences. Conditions determine when duties arise and whether a failure is excused. The distinction between material and minor breach determines whether a party can terminate or must continue. Substantial performance prevents forfeiture when the essential bargain has been delivered, while anticipatory repudiation protects parties from waiting helplessly for an inevitable failure. Together, these principles shape how contracts function not just on paper, but under pressure, when performance is contested and stakes are high.