Partial performance: Overview, definition and example
What is partial performance?
Partial performance refers to a situation where one party in a contract has begun to fulfill their responsibilities, but hasn’t completed all the terms outlined in the agreement. In many cases, the other party may still be required to uphold their end of the deal, even though the contract is not fully executed.
For example, if a contractor begins a construction project but has not finished all the work, they have partially performed their responsibilities. Partial performance can affect a party's ability to terminate the contract or claim a breach, depending on the circumstances.
Why is partial performance important?
Partial performance is important because it allows parties to demonstrate that they have made a good-faith effort to fulfill their contractual responsibilities. In some cases, it may prevent one party from terminating the contract outright or claiming a breach, especially if the performance already completed can be considered substantial.
Understanding partial performance helps businesses navigate situations where one side has completed part of their obligations, but the agreement isn’t fully met. It can also guide decisions on whether to proceed with the contract, renegotiate terms, or terminate the agreement.
Understanding partial performance through an example
Imagine a business enters into a contract with a supplier to deliver 1,000 units of a product by the end of the month. The supplier delivers 700 units on time, but the remaining 300 units are delayed. In this case, the supplier has partially performed their obligations.
The business might still be obligated to pay for the 700 units delivered, even though the contract wasn’t fully performed. However, the supplier may face consequences or penalties for failing to deliver the full quantity on time, depending on the terms of the agreement.
An example of a partial performance clause
Here’s how a partial performance clause might be written in a contract:
"If either party has substantially performed its obligations under this Agreement, any failure to complete minor portions of the work shall not constitute a material breach, and the other party shall be obligated to pay for the work performed to date."
Conclusion
Partial performance can play a critical role in determining the outcome of contract disputes or misunderstandings. It allows for flexibility when one party has made significant progress, but hasn’t fully met their obligations. Businesses should be aware of how partial performance might affect their ability to terminate contracts or claim damages, and ensure that contracts clearly define what constitutes substantial or partial performance.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.