J. Norman Stark | December 12, 2016
In every construction contract and construction project, the term “substantial performance” is frequently referred to as “substantial completion”. This term, derived from custom and judicial precedent, rather than statutes, provides that when the work has been completed, even imperfectly, such performance warrants payment. In construction claims, most legal decisions have held that no one should be denied payment for work performed less than perfectly.
Construction Law Definition of Substantial Performance
“Substantial performance” has been defined as: “…that performance of a [construction] contract which, while not full performance, is so nearly equivalent to what was bargained for, that it would be unreasonable to deny the promisee [contractor] the full contract price subject to the promissor’s [owner’s] right to recover whatever damages may have been occasioned . . . by the promisee’s [contractor’s] failure to render full performance.”
The doctrine of substantial performance is based upon the legal principles of equity, which requires: “…doing that which should, in all fairness, be done”. It seeks to prevent an owner from becoming unjustly enriched where the construction contractor has substantially performed its contractual obligations, and the owner attempts to withhold or avoid timely payment of the contract sums when due, because of minor items that may require correction or completion.
Where the contractor has performed work whereby the construction project is fit for occupancy and use, the contractor has complied with substantial performance of the construction contract. Even where minor or incomplete items remain for “punch listing” repairs or touch-up, the contractor is entitled to payment, without unreasonable deductions or punitive payment retention. Owners may not rely upon minor deficiencies to deny prompt payment under the law.